-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JIkoi3RFE/HgPpTQhrAc0o0iK8OaT+krNuqXdfEnWx3NIfUQvUe6dNh9VqcxsJpe 6sMPQV2Lqx1PHj5qTOpXaQ== /in/edgar/work/20000628/0000940180-00-000766/0000940180-00-000766.txt : 20000920 0000940180-00-000766.hdr.sgml : 20000920 ACCESSION NUMBER: 0000940180-00-000766 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 31 FILED AS OF DATE: 20000628 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NASSAU BROADCASTING CORP CENTRAL INDEX KEY: 0001113712 STANDARD INDUSTRIAL CLASSIFICATION: [4832 ] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-36634 FILM NUMBER: 663507 BUSINESS ADDRESS: STREET 1: 619 ALEXANDER ROAD CITY: PRINCETON STATE: NJ ZIP: 08540 MAIL ADDRESS: STREET 1: 619 ALEXANDER ROAD CITY: PRINCETON STATE: NJ ZIP: 08540 S-1/A 1 0001.txt AMENDMENT NO. 1 TO FORM S-1 As filed with the Securities and Exchange Commission on June 28, 2000 Registration Statement No. 333-36634 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------- AMENDMENT NO. 1 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------- Nassau Broadcasting Corporation (Exact Name of Registrant as Specified in Its Charter) Delaware 4832 223737119 (State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Incorporation or Organization) Classification Code Number) Identification Number)
619 Alexander Road Princeton, New Jersey 08540 (609) 452-9696 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) -------------- Michael S. Libretti Executive Vice President and Chief Financial Officer Nassau Broadcasting Corporation 619 Alexander Road Princeton, New Jersey 08540 (609) 452-9696 (Name, address, including zip code, and telephone number, including area code, of agent for service) -------------- Copies to: Phyllis G. Korff, Esq. Michael J. Schiavone, Esq. Skadden, Arps, Slate, Meagher & Shearman & Sterling Flom LLP 599 Lexington Avenue Four Times Square New York, New York 10022 New York, New York 10036-6522 Tel: (212) 848-4000 Tel: (212) 735-3000 Fax: (212) 848-7179 Fax: (212) 735-2000 -------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box: [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [_] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: [_] -------------- CALCULATION OF REGISTRATION FEE - --------------------------------------------------------------------------------
Title of Each Class of Proposed Maximum Aggregate Amount of Registration Securities To Be Registered Offering Price(1) Fee(2) - -------------------------------------------------------------------------------- Class A common stock, $0.01 par value................. $236,075,000 $62,324 - --------------------------------------------------------------------------------
(1)Estimated solely for the purpose of computing the registration fee in accordance with Rule 457(o) of the Securities Act. (2)Nassau previously paid $50,160 of this registration fee on May 9, 2000. -------------- The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- EXPLANATORY NOTE This Amendment No. 1 to the Registration Statement contains two forms of prospectus: one to be used in connection with a U.S. and Canadian offering of the registrant's class A common stock and one to be used in a concurrent international offering of the class A common stock. The international prospectus will be identical to the U.S. prospectus except that it will have a different front cover page, underwriting section and back cover page. The U.S. prospectus is included herein and is followed by the alternate front cover page, underwriting section and back cover page to be used in the international prospectus, each of which has been labeled "Alternative Page for International Prospectus." ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +The information in this prospectus is not complete and may be changed. We may + +not sell these securities until the registration statement filed with the + +Securities and Exchange Commission is effective. This prospectus is not an + +offer to sell these securities and it is not soliciting an offer to buy these + +securities in any state where the offer or sale is not permitted. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subject to Completion Preliminary Prospectus dated June 28, 2000 P R O S P E C T U S 12,425,000 Shares Nassau Broadcasting Corporation Class A Common Stock ----------- This is Nassau's initial public offering. Nassau is selling all of the shares. The U.S. underwriters are offering 9,940,000 shares in the U.S. and Canada and the international managers are offering 2,485,000 shares outside the U.S. and Canada. We expect the public offering price to be between $16 and $19 per share. Currently, no public market exists for the shares. After pricing of the offering, we expect that the shares will be quoted on the Nasdaq National Market under the symbol "NBCR." Investing in the class A common stock involves risks that are described in the "Risk Factors" section beginning on page 11 of this prospectus. -----------
Per Share Total --------- ----- Public offering price............................. $ $ Underwriting discount............................. $ $ Proceeds, before expenses, to Nassau.............. $ $
The U.S. underwriters may also purchase up to an additional 1,491,000 shares from Nassau at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover over- allotments. The international managers may similarly purchase up to an additional 372,750 shares from Nassau. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The shares of class A common stock will be ready for delivery on or about , 2000. ----------- Merrill Lynch & Co. Salomon Smith Barney ----------- Banc of America Securities LLC Lazard Prudential Volpe Technology a unit of Prudential Securities ----------- The date of this prospectus is , 2000. Prospectus Cover and Outside Back Cover The cover page of the prospectus and the outside back cover will contain the Nassau Broadcasting Corporation logo. The main graphic in this logo is a lowercase "n" written in a cursive font. It is in the center of the image and is in a deep gold color. Just below, "Nassau Broadcasting Corporation" is written in a blue violet. All letters are capitalized and the font size in relationship with the "n" is approximately 36 points smaller. Beneath this text "A New Generation of Broadcasting" is written in a silver color. The text is all capitalized and the width of the phrase stretches out to fit the same length as the phrase above it. This font size relative to the text above it is approximately 24 points smaller. Inside Back Cover The inside back cover to the prospectus will contain a map of DataWorld, Inc. AM coverage. This geographic map outlines in color certain states and sections of other states that are located in the mid-Atlantic region of the United States. These states include all of New Jersey, most of Connecticut, southern Massachusetts, southeastern New York State (New York City is at the center of the piece), eastern Pennsylvania, northern Maryland and northern Delaware. The Atlantic Ocean and the Long Island Sound are the two bodies of water that are shown. All major cities are pinpointed and labeled in bold text. Major counties are also listed by black thin lines. Other central cities are pinpointed and labeled in smaller font. The regions that Nassau's AM stations' signals cover are all outlined and labeled in different colors. Inside Front Cover The inside front cover to the prospectus will contain a map of DataWorld, Inc. FM coverage. This geographic map outlines in color certain states and sections of other states that are located in the mid-Atlantic region of the United States. These states include all of New Jersey, most of Connecticut, southern Massachusetts, southeastern New York State (New York City is at the center of the piece), eastern Pennsylvania, northern Maryland and northern Delaware. The Atlantic Ocean and the Long Island Sound are the two bodies of water that are shown. All major cities are pinpointed and labeled in bold text. Major counties are also listed by black thin lines. Other central cities are pinpointed and labeled in smaller font. The regions that Nassau's FM stations' signals cover are all outlines and labeled in different colors. TABLE OF CONTENTS
Page ---- Summary.................................................................. 3 Risk Factors............................................................. 11 Recapitalization and Reorganization...................................... 18 Pending Acquisitions..................................................... 19 Use of Proceeds.......................................................... 22 Dividend Policy.......................................................... 22 Capitalization........................................................... 23 Dilution................................................................. 24 Unaudited Pro Forma Consolidated Financial Data.......................... 26 Selected Historical Financial Data....................................... 34 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 36 Industry Overview........................................................ 46 Business................................................................. 49 Management............................................................... 71 Related Party Transactions............................................... 80 Principal Stockholders................................................... 82 Description of Capital Stock............................................. 83 Shares Eligible for Future Sale.......................................... 89 Material United States Federal Tax Consequences to Non-U.S. Holders of Our Class A Common Stock................................................ 91 Underwriting............................................................. 93 Legal Matters............................................................ 98 Experts.................................................................. 98 Where You Can Find Additional Information................................ 99 Index to Financial Statements............................................ F-1
i SUMMARY This is only a summary and does not contain all of the information that may be important to you. You should read the entire prospectus, including the risk factors section and our financial statements and related notes, before making an investment decision. Nassau Broadcasting Corporation We are a radio broadcasting company focused on building contiguous clusters of local radio stations in demographically attractive suburban areas surrounding major metropolitan markets in the northeastern United States. Nassau views radio markets as demographically attractive when they serve highly populated suburban areas characterized by above average affluence and retail sales per capita. Presently, we own and/or operate 11 FM and 10 AM stations located in five markets in New Jersey, Pennsylvania and New York. Pro forma for pending acquisitions, we will own and/or operate 17 FM and 15 AM stations located in nine markets in New Jersey, Pennsylvania, New York and Connecticut. We have assembled geographically adjacent groups, or clusters, of market- leading radio stations offering market characteristics that we believe provide us with significant growth potential. On a historical basis, we had net revenues of $31.4 million and broadcast cash flow of $10.6 million for the year ended December 31, 1999 and net revenues of $7.3 million and broadcast cash flow of $2.0 million for the three months ended March 31, 2000. Broadcast cash flow means operating income (loss) before depreciation and amortization expense, corporate general and administrative expenses and local marketing agreement fees. After giving effect to a recent sale of all our membership interests in Nassau Tower Holdings LLC, which owns real estate properties on which the broadcasting facilities we use are located, and our pending acquisitions we would have had, on a pro forma basis, net revenues of $55.9 million and broadcast cash flow of $20.6 million for the year ended December 31, 1999 and net revenues of $13.0 million and broadcast cash flow of $4.5 million for the three months ended March 31, 2000. By acquiring, developing and operating radio stations in demographically attractive suburban markets, we have substantially increased the net revenues and broadcast cash flow of our stations resulting in 21.0% and 33.0% two-year compound annual same station net revenue and same station broadcast cash flow growth, respectively. We have organized our stations into four clusters: Northern, Northwestern, Central and Shore. We also have a division called the Nassau Radio Network that markets all of our stations to national advertisers. Our stations currently cover approximately 4.8 million people and, if we complete our pending acquisitions, our stations will cover approximately 7.1 million people. Our principal executive offices are located at 619 Alexander Road, Princeton, New Jersey 08540, our telephone number is (609) 452-9696, and the address of our website is www.nassaubroadcasting.com. We do not intend the information contained on our website to be part of this prospectus. Competitive Strengths We believe that the following competitive strengths have been critical to our success: . Covering contiguous suburban markets. We provide comprehensive coverage of suburban markets surrounding the New York and Philadelphia metropolitan areas, which we believe are demographically attractive and have strong revenue growth potential; . Strengthening underperforming stations. We have a demonstrated record of developing and strengthening underperforming radio stations into viable, competitive local brands that produce significant revenue and cash flow increases; . Operating stations effectively. We have generated consistent growth on a same station basis at both our developing and established stations; . Acquiring and integrating stations. We have successfully acquired and integrated 19 stations during the past five years; and 3 . Broad base of advertisers. We have a broad base of advertising clients. No one client accounts for more than 1% of our total revenues, and Internet companies account for less than 1% of our revenues. We have achieved the following growth by operating our stations in market clusters and having advertising, sales and programming expertise: . same station net revenues increased 25.0% from 1998 to 1999; and . same station broadcast cash flow increased 42.0% from 1998 to 1999. We calculated same station results for the periods presented above for stations we operated as of January 1, 1998 and continued to operate through December 31, 1999. Operating Strategy We intend to continue to grow our business, both internally and through acquisitions, by pursuing the following strategies: . Building station clusters. We operate multiple stations within each of our markets and cluster them to provide beneficial operating efficiencies and deliver extensive coverage of diverse and attractive demographic groups to advertisers in a cost-effective manner. . Improving station programming. We focus on continually enhancing and increasing the local content of our station programming to increase our audience share. . Enhancing brand awareness. We brand and market individual stations to improve audience recognition, loyalty and ratings. . Cultivating a broad base of advertisers. We continue to develop our sales force to proactively serve local and national advertisers. We have sustained substantial net losses since our inception and have never generated positive operating income. We incurred net losses of approximately $6.7 million in 1997, $4.0 million in 1998, $4.6 million in 1999 and $1.0 million for the three months ended March 31, 2000. We expect to continue to incur net losses while we pursue our strategy of growing our business. Acquisition Strategy We intend to continue to expand our presence in demographically attractive suburban areas surrounding major metropolitan markets, primarily in the Northeast. We target markets that have lower radio market revenue relative to total retail sales as compared to the national average and/or where radio has historically captured only a small portion of total local advertising expenditure. We seek to acquire stations that enable us to further strengthen our presence in existing markets or to create leadership positions in new, complementary markets. Frequently, the suburban areas we target are markets that have fragmented ownership of radio stations or a limited number of fully developed local stations. We are especially attracted by the opportunity to acquire underperforming stations with the potential for significantly increased revenues. We have an established process to integrate new stations into our portfolio, culture and operating philosophy. As we integrate our acquisitions, we involve senior management in the design and execution of plans to revitalize any underperforming stations and transform them into more profitable ones. 4 Station Portfolio The following table sets forth information as of the date of this prospectus with respect to stations we own, operate or have agreed to acquire. We have not received regulatory approvals in connection with any of our pending acquisitions and, with respect to some of them, we have not yet applied to the Federal Communications Commission for approval. We cannot assure you that the FCC or any other regulatory body will grant final orders approving these acquisitions or that we or any other relevant party will be able to satisfy all of the other conditions required to close these acquisitions. The completion of this offering is not conditioned upon the consummation of any of the pending acquisitions.
1999 Radio Group 1999 1999 1999 Stations Rank in Market Radio Market Number of Radio Market --------- Market Market Rank Revenue Rank Listeners(1) Revenue Growth FM AM Revenue ------ ------ ------------ ------------ -------------- -- ---- ----------- Northern (2) Westchester, NY (3)..... 1 2 161,600 16.8% 2 1 N/A Bridgeport, CT.......... 112 91 320,100 5.6% 1 1 1 Danbury, CT............. 189 190 148,600 8.0% 2 2 2 Northwestern Sussex, NJ.............. 239 250 188,900 16.7% 3 1 1 Newburgh-Middletown, NY (4).................... 141 258 18,500 9.8% 1 1 5 Wilkes Barre-Scranton, PA..................... 64 77 64,900 11.3% 1 2 4 Allentown, PA (5)....... 67 76 235,100 6.8% 1 1 3 Central Trenton, NJ (6)......... 138 100 858,800 14.6% 2 4 1 Shore Monmouth-Ocean, NJ (7).. 47 83 419,300 21.3% 4 2 1 --------- ---- ---- Total................. 2,415,800 17 15 ========= ==== ====
- -------- (1) Number of listeners refers to the estimated number of different persons who listened to a station for a minimum of five minutes in a quarter-hour within a specified period in the day. (2) Consists of the nine radio stations we expect to own upon our acquisition of Aurora Communications, LLC. (3) Falls within the greater New York market. (4) Consists of the two radio stations we expect to acquire from Port Jervis Broadcasting Co., Inc. (5) Consists of the two radio stations we expect to acquire from Clear Channel Communications, Inc. (6) Includes two radio stations we expect to acquire from Great Scott Broadcasting Ltd. and one radio station we expect to acquire from Multicultural Radio Broadcasting, Inc. (7) Includes the construction permit of WCHR (FM), which we will acquire upon our acquisition of Manahawkin Communications Corporation and two radio stations we expect to own upon our acquisition of North Shore Broadcasting Corp. and Seashore Broadcasting Corp. 5 The Offering Class A common stock offered by us: U.S. offering....................... 9,940,000 shares International offering.............. 2,485,000 shares ----------------- Total........................... 12,425,000 shares 12,544,419 shares of class A common Shares outstanding after the offering.. stock 4,780,931 shares of class B common stock 761,280 shares of class C common stock Voting rights.......................... Class A common stockholders have one vote for each share, class B common stockholders have ten votes for each share and class C common stockholders have no votes. Conversion rights...................... Class A common stockholders may convert their shares into class C common stock on a one-for-one basis. Class B common stockholders may at any time convert their shares into shares of class A or class C common stock on a one-for-one basis. In addition, the shares of class B common stock convert automatically into shares of class A common stock on a one-for-one basis upon their transfer to someone other than a permitted transferee. Class C common stockholders may only convert their shares into shares of class A or class B common stock at the option of the holders upon satisfying conditions specified in our certificate of incorporation. Use of proceeds........................ We estimate that our net proceeds from this offering without exercise of the underwriters' over-allotment options will be approximately $200.7 million. We intend to use these net proceeds: . to redeem all of our outstanding senior discount notes; . to finance a portion of the acquisition of Aurora Communications; . to finance most of the acquisition of the Allentown stations; . to reimburse the limited partners of our predecessor for tax payable by them as a result of our reorganization; and . to pay transaction costs and provide for general corporate purposes. Risk factors........................... See "Risk Factors" and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our class A common stock. Nasdaq National Market symbol.......... NBCR
The number of shares of class A common stock outstanding after the offering excludes: . 2,309,317 shares of class A common stock we have reserved for issuance under our 2000 stock incentive plan, of which we have already issued options to acquire 309,317 shares under this plan at a weighted average option price of $1.21; and . up to 1,863,750 additional shares of class A common stock issuable upon exercise of the underwriters' over-allotment options. 6 Summary Pro Forma Consolidated Financial Data In the table below, we provide you with our summary unaudited pro forma consolidated financial data as of the dates and for the periods indicated. Our unaudited pro forma consolidated statement of operations data for the year ended December 31, 1999 and for the three months ended March 31, 2000 give effect to the following transactions as though they had occurred on January 1, 1999 and January 1, 2000, respectively: . our recapitalization and reorganization; . the completion of this offering and the application of the net proceeds as described in this prospectus; . the completion of our acquisition of Aurora Communications; . the completion of our acquisition of two radio stations in Allentown, Pennsylvania; . the completion of our acquisitions of WILT (AM) and WCHR (FM); . the completion of our acquisitions of seven stations that we currently operate under local marketing agreements; and . the sale of all our membership interests in Nassau Tower Holdings LLC. Our unaudited pro forma consolidated balance sheet data as of March 31, 2000 gives effect to those of the transactions listed above that are expected to occur, or have occurred, after March 31, 2000, as if they had occurred on March 31, 2000. We have included all adjustments, consisting only of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of this data. We based the pro forma adjustments on available information and on assumptions that we believe are reasonable under the circumstances. We provide you with our summary unaudited pro forma consolidated financial data for illustrative purposes only and not to indicate what our results of operations or financial position would have been if we had consummated the transactions described above on the dates indicated or to indicate future results of operations or financial positions. We based the summary unaudited pro forma consolidated financial data on assumptions and adjustments we describe in the notes to the unaudited pro forma consolidated financial data included elsewhere in this prospectus. You should read the following data in conjunction with our historical financial statements and related notes, our unaudited pro forma consolidated financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus. 7 Summary Pro Forma Consolidated Financial Data (Cont'd)
Year Ended Three Months Ended December 31, 1999 March 31, 2000 ----------------- -------------------- (unaudited) (dollars in thousands, except per share data) Statement of Operations Data: Gross revenues......................... $ 61,568 $ 14,222 Less agency and outside commissions.... 5,709 1,239 ---------- ---------- Net revenues......................... 55,859 12,983 ---------- ---------- Operating expenses..................... 35,229 8,455 Depreciation and amortization.......... 17,409 4,552 Corporate general and administrative expenses.............................. 2,280 587 Local marketing agreement fees......... 700 175 ---------- ---------- Total operating expenses............. 55,618 13,769 ---------- ---------- Operating income (loss)............ 241 (786) ---------- ---------- Other income (expense) Investment income.................... 2,562 453 Gain on sale of assets............... 567 1,633 Interest expense..................... (10,916) (2,810) Loss on impairment................... (13,250) -- ---------- ---------- Total other expense.................. (21,037) (724) ---------- ---------- Net Loss............................. $ (20,796) $ (1,510) ========== ========== Basic and diluted net loss per common share................................. $ (1.15) $ (0.08) ========== ========== Weighted average shares outstanding used in determining net loss per share................................. 18,151,805 18,151,805 ========== ========== Other Data: Broadcast cash flow (1)................ $ 20,630 $ 4,528 EBITDA (1)............................. 18,350 3,941 After-tax cash flow (1)................ 9,296 1,409 As of March 31, 2000 -------------------- (unaudited) (in thousands) Balance Sheet Data: Cash and cash equivalents.............. $ 1,883 Working capital........................ 814 Total assets........................... 306,230 Total indebtedness..................... 112,214 Stockholders' equity................... 182,253
- -------- (1) The term "broadcast cash flow" means operating income (loss) before depreciation and amortization expense, corporate general and administrative expenses and local marketing agreement fees. The term "EBITDA" means operating income (loss) before depreciation and amortization expense and local marketing agreement fees. The term "after-tax cash flow" means income (loss) before extraordinary items, where applicable, minus net gain on sale of assets, plus depreciation and amortization expense. Although broadcast cash flow, EBITDA and after-tax cash flow are not measures of performance calculated in accordance with GAAP, we believe that they are useful to an investor in evaluating our performance because they are measures widely used in the broadcasting industry to evaluate a radio company's operating performance. However, you should not consider broadcast cash flow, EBITDA and after-tax cash flow in isolation or as substitutes for net income, cash flow from operating activities and other income or cash flow statement data prepared in accordance with GAAP, or as measures of liquidity or profitability. Broadcast cash flow, EBITDA and after-tax cash flow, as we define these terms, may not be comparable to similarly titled measures other companies use. 8 Summary Historical Financial Data In the table below, we provide you with our summary historical financial data as of the dates and for the periods indicated. The historical financial data appearing below is that of Nassau Broadcasting Partners, L.P. We have derived the statement of operations data for each of the years in the three- year period ended December 31, 1999 from the audited financial statements of Nassau Broadcasting Partners, L.P. included elsewhere in this prospectus. We have derived the statement of operations data for the three months ended March 31, 1999 and 2000 and the balance sheet data as of March 31, 2000 from the unaudited financial statements of Nassau Broadcasting Partners, L.P. which have been prepared on the same basis as the audited financial statements and which, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of this data. Results for the three-month period ended March 31, 2000 are not necessarily indicative of results that may be expected for the entire year or for any future period. You should read the following data in conjunction with our historical financial statements and related notes, our unaudited pro forma consolidated financial statements and related notes, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.
Three Months Year Ended December 31, Ended March 31, ---------------------------- ------------------ 1997 1998 1999 1999 2000 -------- ------- --------- ------- --------- (unaudited) (dollars in thousands except per share data) Statement of Operations Data: Gross revenues............... $ 20,891 $27,349 $ 34,295 $ 6,811 $ 7,893 Less agency and outside commissions................. 1,812 2,353 2,893 544 612 -------- ------- --------- ------- --------- Net revenues................ 19,079 24,996 31,402 6,267 7,281 -------- ------- --------- ------- --------- Operating expenses........... 13,437 17,227 20,794 4,570 5,318 Depreciation and amortization................ 2,139 2,364 2,634 603 822 Corporate general and administrative expenses..... 1,995 1,825 2,280 500 587 Local marketing agreement fees........................ 1,666 2,271 2,517 725 640 -------- ------- --------- ------- --------- Total operating expenses.... 19,237 23,687 28,225 6,398 7,367 -------- ------- --------- ------- --------- Operating income (loss).... (158) 1,309 3,177 (131) (86) -------- ------- --------- ------- --------- Other income (expense) Investment income........... 530 992 2,562 154 453 Gain on sale of assets...... -- 3,176 567 141 1,633 Interest expense............ (6,367) (8,781) (10,946) (2,718) (3,024) Special management fee...... (744) -- -- -- -- -------- ------- --------- ------- --------- Total other expense........ (6,581) (4,613) (7,817) (2,423) (938) -------- ------- --------- ------- --------- Loss before extraordinary item...................... (6,739) (3,304) (4,640) (2,554) (1,024) Extraordinary loss on early retirement of debt.......... -- (677) -- -- -- -------- ------- --------- ------- --------- Net loss................... $ (6,739) $(3,981) $ (4,640) $(2,554) $ (1,024) ======== ======= ========= ======= ========= Pro forma: Basic and diluted loss per common share............... $ (0.82) $ (0.18) ========= ========= Weighted average shares outstanding used in determining net loss per share...................... 5,661,630 5,661,630 ========= ========= Other Data: Broadcast cash flow ......... $ 5,642 $ 7,769 $ 10,608 $ 1,697 $ 1,963 EBITDA....................... 3,647 5,944 8,328 1,197 1,376 After-tax cash flow ......... (4,600) (4,116) (2,573) (2,093) (1,835) Net cash provided by (used in) Operating activities........ (3,600) (1,041) (233) 117 27 Investing activities........ (18,334) 3,535 (8,300) (6,905) (4,487) Financing activities........ 17,172 3,847 2,071 (536) 6,269
9
As of March 31, 2000 ---------------------- (unaudited) (dollars in thousands) Balance Sheet Data: Cash and cash equivalents................................ $ 4,497 Working capital.......................................... 8,428 Total assets............................................. 82,686 Total indebtedness....................................... 97,412 Stockholders' deficiency................................. (21,489)
10 RISK FACTORS You should consider the risks described below before making an investment decision. We believe that the risks and uncertainties described below are the principal material risks facing us as of the date of this prospectus. In the future, we may become subject to additional risks that are not currently known to us. If any of the following risks occur, our business, financial condition or results of operations could be materially adversely affected. In addition, the trading price of our class A common stock could decline due to any of the following risks, and you could lose all or part of your investment. Risks relating to our business The market price of our class A common stock could decline and you could lose some or all of your investment if our losses continue. Since our inception, we have incurred substantial net losses and, on an annual basis, have never generated positive cash flow from operations. For the years ended December 31, 1997, 1998 and 1999, we incurred net losses of approximately $6.7 million, $4.0 million and $4.6 million, respectively, and our net loss for the three months ended March 31, 2000 is approximately $1.0 million. Our aggregate net losses to March 31, 2000 are approximately $16.4 million. We believe that we will continue to incur losses while we pursue our strategy of acquiring radio stations and developing our network. We may never become profitable or generate positive cash flow. If we are unable to become profitable, the market price of our class A common stock could decline, and you could lose some or all of your investment in us. In addition, if the market price declines, we might be unable to raise additional capital through debt or equity issuances. Because of our substantial level of debt and the restrictions imposed on us by the terms of our debt, we might be unable to grow or compete. As of March 31, 2000, after giving pro forma effect to our pending acquisitions, our recapitalization and reorganization and this offering, we would have had outstanding long-term debt, inclusive of current portion, of approximately $112.2 million. Because of this substantial level of debt: . it could be difficult for us to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate or other purposes; . we might have to dedicate a substantial portion of cash flow from our operations to make interest and principal payments on our debt; and . we could be more vulnerable to economic downturns, limited in our ability to withstand competitive pressures and less flexible in adjusting rapidly to changing business and economic conditions. The following table represents the aggregate amount of principal and interest due each year for the next five years based upon the amount of debt specified above.
Principal and Year Interest Due ---- ------------- 2000........................... $14,045,000 2001........................... 17,728,000 2002........................... 20,119,000 2003........................... 21,041,000 2004........................... 20,191,000
11 In addition, because our new credit facility is secured by substantially all of our assets, we might be forced to sell some of our assets if we are unable to service our debt. Our new credit facility contains covenants that restrict our ability to: . incur additional indebtedness, contingent liabilities and liens; . redeem or repurchase capital stock and redeem, repurchase or prepay subordinated debt; . pay cash dividends or make other distributions on our capital stock; . enter into specified investments or joint ventures; . consolidate, merge or effect asset sales; . make capital expenditures; . enter into sale and leaseback transactions; . sell or discount accounts receivable; . enter into transactions with stockholders and affiliates; and . change the nature of our business. Our new credit facility also requires us to maintain financial ratios with respect to interest coverage, fixed charge coverage and senior and total debt. A breach of any of these covenants could result in a default under our new credit facility. Upon the occurrence of an event of default under our new credit facility, the lenders could elect to declare the debt to be due and payable immediately and could terminate their commitments to make further extensions of credit. If the debt under our new credit facility were accelerated, our assets might not be sufficient to repay in full this debt and our other debt. Our acquisition strategy might not yield the results that we anticipate which could cause the price of our class A common stock to decline. We intend to accelerate our growth by acquiring additional radio stations in suburban areas surrounding major metropolitan markets, primarily in the Northeast. Our strategy of accelerating growth through acquisitions is subject to a variety of risks, including: . a reduction in the number of suitable acquisition targets resulting from continued industry consolidation; . an increase in prices for radio stations due to increased competition for acquisition opportunities; . an inability to negotiate definitive purchase agreements on satisfactory terms; . our failure to complete, or unanticipated delays in completing, acquisitions due to difficulties in obtaining regulatory approval; . difficulty in integrating the operations, systems and management of our acquired stations and absorbing the increased demands on our administrative, operational and financial resources; . the diversion of management's attention from their other business concerns; . the loss of key employees of acquired stations; and . an inability to strengthen underperforming stations. If we are not able to address successfully these risks, we will be unable to achieve targeted growth levels and the value of our class A common stock could decline. Our company, and your investment in our company, could be less valuable if we are unable to close our pending acquisitions. Our pending acquisitions will not close unless we and the other relevant parties satisfy or waive all the conditions to closing. In addition, we cannot waive legal and regulatory requirements. For example, the Communications Act of 1934 and FCC rules and regulations limit the number of stations that one individual or entity can own, directly or by attribution, in a market and requires prior approval from the FCC for the issuance, renewal, modification, transfer of control or assignment of broadcasting licenses to us. To date, we 12 have not received final orders from the FCC approving any of our pending acquisitions. In addition, if interested members of the public file petitions or complaints against us or any FCC licensee from which we propose to acquire a station, these petitions or complaints could result in the FCC delaying the grant of, refusing to grant, or imposing conditions on its consent to the assignment or transfer of control of FCC licenses. As a result, we might not be able to close any of these acquisitions within the expected time frame or at all. In addition, we could be subject to further examination by the Department of Justice or the Federal Trade Commission which evaluate acquisitions to determine whether they serve the public interest and whether they should be challenged under antitrust laws. Any decision by the Department of Justice or the Federal Trade Commission to challenge any proposed acquisition could affect our ability to close that acquisition. Depending on the size of the acquisition, a failure to close, or a substantial delay in closing, could have a material adverse effect upon our business prospects, financial condition and results of operations. The completion of this offering is not conditioned upon the consummation of any of our pending acquisitions. If we are unable to manage effectively our rapid growth, our operating results will suffer. We have experienced rapid growth over a period of approximately four years and expect to continue to experience rapid growth in the future. We now operate 21 stations, which will increase to 32 stations when, and if, we complete our pending acquisitions. To effectively manage this growth, we will need to, amongst other things, continue to develop our financial and management controls and management information systems, maintain stringent cost controls, increase marketing activities and train new personnel. We intend to hire additional personnel in order to manage our expected growth and expansion. If we fail to successfully manage our rapid growth, our operating results will suffer and the value of our class A common stock will decline. If we are unable to obtain additional financing when required for operations or growth, our business may suffer and our revenues could decline. We might require financing for operations or future acquisitions in excess of that provided under our new credit facility. Our new credit facility or any other agreements to which we are a party might prohibit us from obtaining additional financing from other sources. Even if we are permitted to seek third party financing, additional financing for these purposes may not be available to us or, if available, the additional financing may not be provided on terms acceptable to us. If we cannot obtain additional financing when required on acceptable terms, we may be unable to continue operations on the same scale or grow our business. As a result, we may be unable to compete successfully with other broadcasters and we could lose audience share and advertisers, causing our revenues to decline. Our operations are concentrated in a limited number of markets. A downturn in any of our markets could result in a decline in our revenue and cash flow. Our stations are located in a limited number of markets in the northeastern United States. We currently own and/or operate stations in five markets and, upon completion of our pending acquisitions, we will own and/or operate stations in nine markets. A significant decline in net broadcasting revenue from our stations in any one of these markets, and particularly in our two largest existing markets, the Trenton, New Jersey and the Monmouth-Ocean, New Jersey markets, could have a material adverse effect on our operations and financial condition. The loss of key personnel could disrupt our business and result in a loss of advertising revenue. Our business depends on the continued efforts, abilities and expertise of our senior officers and key employees. These include Louis F. Mercatanti, Jr., our President and Chief Executive Officer, Michael Libretti, our Executive Vice President, Operations and Finance and Chief Financial Officer, and Peter Tonks, our Executive Vice President and Director of Accounting & Human Resources. In particular, Mr. Mercatanti has been instrumental in determining our strategic direction and focus. If we lose the services of any of these senior 13 officers, our ability to expand our business could be seriously compromised and the value of your investment could decline. In addition, in the future if we are unable to: . attract and retain highly skilled and qualified management personnel, . expand, train and manage our employee base, or . develop, attract and retain on-air radio talent, in the future, our listener base could decline, our advertising revenue could decrease and our business will be unsuccessful. Our quarterly results are subject to seasonal fluctuations; these fluctuations could cause volatility in the market price of our class A common stock. Typically, our revenues are lowest in the first quarter and highest in the fourth quarter. This seasonality could cause fluctuations in the market price of our class A common stock, including a drop in the market price of our class A common stock in response to our first quarter earnings. Risks relating to our industry If we are unable to compete effectively against other radio stations and other media companies, we will suffer a decrease in advertising revenue. Radio broadcasting is a highly competitive business. The Telecommunications Act of 1996 facilitates the entry of other radio broadcasting companies into our current or future markets. The financial success of each of our radio stations will depend, to a significant degree, upon our audience demographics and ratings, our share of the overall radio advertising revenue within each geographic market and the economic health of that market. Our radio stations compete for audience share and advertising revenue directly with other FM and AM radio stations as well as with other advertising media within their respective markets. The radio companies with which we currently compete in our two main markets are New Jersey Broadcasting, Press Communications LLC, Big City Radio Inc. and Jersey Shore Broadcasting, all in the Monmouth-Ocean market, and Crystal Communications, Straus Media Group, Parmal and Sunrise Broadcasting Corporation, all in the Newburgh-Middletown market. Some of these radio stations have the same broadcasting formats as our radio stations and compete for the same audience demographic groups in the same market. If we are unable to compete successfully with these radio stations, we will lose audience share and advertisers and our revenues will decline. If we do not respond to rapidly changing technology, we will not remain competitive and our operating losses could continue. The radio broadcasting industry is continually adopting rapidly changing technology, such as that permitting satellite and terrestrial delivery of digital audio broadcasting. In addition, several new media technologies are currently being developed, including: . Internet audio content distribution; and . in-band on-channel digital radio and new low-power FM radio, which could result in additional radio services being broadcast on the frequencies currently occupied by traditional FM and AM radio services. We may not be able to afford, or successfully adopt, new technologies on a timely basis or at all, in order to compete effectively with other participants in the radio broadcast industry. If we are unable to compete, we could lose market share and our revenue could decline. 14 If we fail to maintain our licenses, the FCC could terminate our ability to own and operate our radio network. In order to operate, radio broadcasters must maintain radio broadcasting licenses issued by the FCC. The FCC ordinarily issues these licenses for a maximum term of eight years, and broadcasters may renew these licenses. Most of our existing licenses expire in 2006. Although we may apply to renew these licenses, third parties may challenge our renewal applications. In addition, if we or any of our officers, directors or significant stockholders violates the FCC's rules and regulations or the Communications Act, is convicted of a felony, or is otherwise found to be disqualified from being a party to a FCC license, the FCC may commence a proceeding to impose sanctions against us and our licenses might not be renewed. If the FCC revises existing federal regulations relating to ownership criteria, we could be required to divest radio stations. The number of radio stations we may acquire or operate pursuant to local marketing agreements in any market, overall and in each of the AM and FM services, is limited by the Telecommunications Act and FCC rules and regulations. That number may vary depending upon whether the interests in other radio stations or certain other media properties of our officers, directors and stockholders are attributable to them under FCC rules. The FCC generally applies its ownership limits to "attributable" broadcast interests held by an individual, corporation, partnership or other association. The interests of our officers, directors and stockholders with five percent or greater voting power are also generally attributable to us. One of our officers and directors, Louis F. Mercatanti, Jr., and two of our stockholders, Toronto Dominion Capital (U.S.A.), Inc. and Bank of America Capital Investors, after the consummation of the Aurora acquisition, have or will have attributable broadcast interests outside of their involvement with us. These attributable interests could limit the number of radio stations that we may acquire or own in any market in which these officers, directors or stockholders hold or acquire outside attributable broadcast interests. Additionally, the Communications Act and FCC rules and regulations impose limitations on non-U.S. ownership and voting of our capital stock. These and other governmental regulations and policies may change over time and such changes could have a material adverse impact upon our business, results of operations or financial condition. For example, the FCC has recently indicated it may propose new rules to define a "market" for purposes of the local radio station ownership limits in the Telecommunications Act and the FCC's multiple ownership rules. If the FCC redefines "market" for these purposes, the number of stations that we would be allowed to acquire in some markets could be reduced. Risks relating to our ownership structure Our class B common stockholders will continue to control our company and their interests could conflict with yours. The holders of our class B common stock, which has 10 votes per share, will own 78.8% of the outstanding voting power of our common stock, will be able to exercise a controlling influence over us and generally will be able to determine the outcome of all corporate actions requiring stockholder approval. As a result, these holders will be in a position to continue to control all matters affecting us, including: . composition of our board of directors and, through it, our direction and policies, including the appointment and removal of officers; . mergers or other business combinations involving us; . acquisition or disposition of assets; . future issuances of common stock or other securities; 15 . incurrence of debt; . amendments, waivers and modifications to our agreements; and . the payment of dividends on our common stock. The interests of our class B common stockholders could conflict with your interests. The extra voting rights of the class B common stockholders and our ability to issue additional shares of class B common stock could adversely affect the value of the class A common stock. Additional shares of class B common stock can be authorized by the majority vote of voting stockholders acting together as one class. As a result, class A common stockholders generally will not be able to prevent the authorization of additional shares of class B common stock. Risks relating to our class A common stock Sales of class A common stock after this offering could cause the market price of our class A common stock to decline. If our stockholders sell substantial amounts of our class A common stock in the public market following this offering, including shares issued upon the exercise of outstanding options, the market price of our class A common stock could decline. These sales also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate. The shares sold in this offering will be freely tradeable immediately upon completion of this offering. In addition, no later than the 181st day after completion of this offering, our existing stockholders will be able to sell their shares of our common stock, and have the right to require us to register those shares for sale to the public. Our existing stockholders would be able to sell their shares before the 181st day if the underwriters waive contractual lockup restrictions. Sales of these shares could cause the market price of our class A common stock to decline. In addition, following the completion of this offering, we intend to register under the Securities Act the 2,309,317 shares of class A common stock reserved for issuance under our 2000 stock incentive plan. Options to acquire 309,317 shares of class A common stock have already been issued under this plan at a weighted average exercise price of $1.21. Once the 2000 stock incentive plan shares are registered, the class A common stock issued upon exercise of the options will be freely tradeable beginning on the 181st day after completion of this offering or earlier if the underwriters waive contractual lockup restrictions. Provisions of our organizational documents, Delaware law and federal law could have anti-takeover effects that could prevent a change in control, even if this would be beneficial to stockholders. Provisions of our organizational documents and Delaware law could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. Provisions in our organizational documents include: . a classified board of directors, in which our board is divided into three classes with three-year terms with only one class elected at each annual meeting of stockholders, which means that a holder of a majority interest in our common stock will need two annual meetings of stockholders to gain control of the board; . a provision which prohibits our stockholders from acting by written consent without a meeting; . a provision which permits only the board of directors, the president or the chairman to call special meetings of stockholders; and . a provision which requires advance notice to the company of items of business to be brought before stockholders' meetings. 16 Amending any of the above provisions will require the vote of the holders of a majority of our outstanding class A and class B common stock acting together as one class. In addition, the Communications Act and FCC rules require the prior consent of the FCC to any change in control of our company and restrict ownership by non-U.S. persons. This could discourage third parties from acquiring us and consequently decrease the market value of your investment in our class A common stock. As a new investor, you will experience immediate and substantial dilution. The initial public offering price per share of our class A common stock is higher than our net tangible book value per share. Consequently, you will incur immediate and substantial dilution in pro forma net tangible book value of $17.51 per share. If the holders of outstanding options exercise those options, you will incur further dilution. Since the price you will pay for our class A common stock in this offering was not established in a competitive market, the subsequent market price could be lower. Prior to this offering, there has been no public market for our class A common stock. We have applied to list the common stock for trading on The Nasdaq National Market. After this offering, an actual trading market might not develop or continue. If you purchase shares of common stock in this offering, you will pay a price that was not established in a competitive market. This price was negotiated with our underwriters, which is substantially greater than that paid by our existing stockholders. The price of the common stock that will prevail in the market after this offering could be higher or lower than the price you pay. Special note regarding forward-looking statements This prospectus contains forward-looking statements that relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "forecast," "predict," "intend," "potential" or "continue" or the negative of such terms or other comparable terminology. These forward-looking statements are based on current expectations about future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The risks set forth above and elsewhere in this prospectus could cause our future operating results to differ materially from those contemplated by our forward-looking statements. In addition, factors that we are not currently aware of could harm our future operating results. The safe harbor provided by the Private Securities Litigation Reform Act of 1995 is not applicable to the disclosure in this document. --------------- You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date. 17 RECAPITALIZATION AND REORGANIZATION In May 2000, we undertook a recapitalization in which, among other things, we: . entered into a new credit facility that provides for borrowings of up to $144.0 million; . issued and sold units consisting of senior discount notes and limited partnership units for gross proceeds of $60.0 million. The limited partnership units were converted into 119,419 shares of our class A common stock as of the date of this offering; . repaid all outstanding obligations under our old credit facility and redeemed all $42.4 million of our outstanding subordinated discount notes which we had issued to our existing stockholders; and . redeemed $7.5 million of equity interests of, and paid a $2.9 million preferred distribution to, Louis F. Mercatanti, Jr., one of our stockholders. Immediately prior to this offering, we effected a reorganization in which all equity holders of Nassau Broadcasting Partners, L.P. contributed their equity interests in the limited partnership to Nassau Broadcasting Corporation, a newly formed corporation, in exchange for common stock of Nassau Broadcasting Corporation. As a result of the reorganization, Nassau Broadcasting Partners, L.P. is terminated, all of the assets previously held by Nassau Broadcasting Partners, L.P. are now held by Nassau Broadcasting Corporation and the limited liability companies which were wholly owned subsidiaries of Nassau Broadcasting Partners, L.P. are now wholly owned subsidiaries of Nassau Broadcasting Corporation. Before giving effect to this offering, each of our stockholders owned an amount of our common stock representing its previous economic interest in Nassau Broadcasting Partners, L.P. The following table shows the common stock issued in the reorganization. As a result of this reorganization, Spectrum Equity Investors, L.P., Spectrum Equity Investors II, L.P., Grotech Partners IV, L.P. and Mr. Mercatanti hold the majority voting power in us.
Pre-offering Economic Number Of Shares Of Class A, Interest In Our Common Class B Limited Stock Issued In The Or Class C Partnership (1) Reorganization Common Stock --------------- ------------------- ------------ Spectrum Equity Investors, L.P......................... 30.0% 1,789,534 B Spectrum Equity Investors II, L.P......................... 17.0 1,015,043 B Grotech Partners IV, L.P..... 12.7 759,464 B Toronto Dominion Capital (U.S.A.), Inc............... 12.7 761,280 C Louis F. Mercatanti, Jr. (2)......................... 20.3 1,211,823 B Others (3)................... 7.3 124,486 A/B ----- --------- Total........................ 100.0% 5,661,630 ===== =========
(1) On May 4, 2000, we redeemed $7.5 million of equity interests in Nassau Broadcasting Partners, L.P. which were held by Mr. Mercatanti of which $2.5 million was paid in cash. Mr. Mercatanti also has the right to require Nassau Broadcasting Partners to pay the remaining $5.0 million of his equity interests at any time, provided there is no existing event of default under our new credit facility, and no new event of default would result. We calculated these percentages assuming that as of the date of our reorganization, we have redeemed $7.5 million of Mr. Mercatanti's equity interests. (2) Includes 18,559 shares of class B common stock held by Mr. Mercatanti directly, 290,755 shares of class B common stock held by Nassau Broadcasting Company, and 902,509 shares of class B common stock held by Nassau Holdings, Inc. Mr. Mercatanti has the power to vote, or direct the vote, and the power to dispose or direct the disposition, of the shares owned by Nassau Broadcasting Company and Nassau Holdings, Inc. (3) Includes 119,419 shares of our class A common stock issued upon conversion of limited partnership units which we issued in connection with our recapitalization on May 4, 2000. Merrill Lynch Capital Corporation, an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated, owns 39,806 of these shares of our class A common stock. Also includes 5,067 shares of our class B common stock owned by Noel Rahn. 18 PENDING ACQUISITIONS We have several acqusitions currently pending which, if completed, will result in the purchase by us of ten FM and ten AM radio stations. We must receive final regulatory approvals before we can consummate these pending acquisitions. The table below sets forth information regarding each of the pending acquisitions.
No. of Call Purchase Seller Market StationLetterss Price ------ ------ -------------- ------------- (in millions) Owners of Aurora Westchester, NY 3 WFAS (FM) $185.0 (1) Communications, LLC ... WFAF (FM) WFAS (AM) Bridgeport, CT 2 WEBE (FM) WICC (AM) Danbury, CT 4 WAXB (FM) WRKI (FM) WINE (AM) WPUT (AM) Clear Channel Allentown, PA 2 WODE (FM) 30.0 Communications, Inc. .. WEEX (AM) Owners of Manahawkin Communications Corporation............ Monmouth-Ocean, NJ 1 WCHR (FM) (2) 4.7 Multicultural Radio Trenton, NJ 1 WJHR (AM) 2.5 Broadcasting, Inc...... Port Jervis Broadcasting Newburgh-Middletown, NY 2 WTSX (FM) 2.7 Co., Inc............... WDLC (AM) Great Scott Broadcasting Trenton, NJ 2 WNJO (FM) 20.0 Ltd.................... WCHR (AM) Owners of North Shore Broadcasting Corp. and Seashore Broadcasting Corp. ................. Monmouth-Ocean, NJ 2 WOBM (FM) 21.0 WOBM (AM)
- -------- (1) Purchase price is subject to a working capital adjustment. (2) Manahawkin Communications Corporation currently holds a construction permit to build this station. Regulatory Filings We filed an application for consent to acquire WNJO (FM) and WCHR (AM) with the FCC on September 10, 1998. The FCC issued a letter of inquiry dated March 1, 1999 seeking additional information on the radio market concentration in Trenton, New Jersey, which we subsequently provided. The application remains pending before the FCC. We filed an application for consent to acquire control of Manahawkin Communications Corporation, which holds the construction permit for WCHR (FM), with the FCC on September 13, 1999. New Jersey Broadcasting Partners, L.P. and Jersey Shore Broadcasting Corp. challenged this transfer of control application before the FCC on the grounds of premature transfer of control and undue market concentration. We filed a 19 response to this challenge but the transfer application remains pending before the FCC. In addition, on June 23, 1999, New Jersey Broadcasting Partners, L.P. filed a complaint against this acquisition with the Merger Task Force, Antitrust Division, U.S. Department of Justice. To date, the Department of Justice has taken no action on this complaint. On March 10, 2000, we filed an application for consent to acquire two radio stations from Clear Channel Communications, Inc. with the FCC. The FCC placed this application on public notice on April 4, 2000. Interested parties had until May 4, 2000 to challenge our acquisition of these stations. To date, no party has challenged this application. In addition, we filed an application with the Department of Justice for approval of the acquisition under the Hart- Scott-Rodino Antitrust Improvements Act of 1976. The Department of Justice has not yet given this approval. On April 3, 2000, we filed applications for consent to acquire Aurora Communications, LLC which owns nine radio stations with the FCC. The FCC placed these applications on public notice on April 25, 2000. Interested parties had until May 25, 2000 to challenge our acquisition of these stations. To date, no party has challenged these applications. In addition, we filed an application with the Department of Justice for approval of the acquisition under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The Department of Justice has not yet given this approval. All of these applications remain pending before the FCC. We have not yet applied for FCC approval of our acquisitions of the seven radio stations that we currently operate under local marketing agreements. We intend to file our applications to acquire these stations shortly after we complete this offering. Once we file our applications, third parties may file petitions to deny or a request for reconsideration or judicial review or the FCC may reject our applications. We expect the FCC will approve all of these acquisitions, but we cannot assure you that we will obtain any or all of the regulatory approvals we seek. In addition, other factors beyond our control could delay or prevent the closing of these acquisitions. Acquisition Agreements Aurora Communications, LLC. On March 24, 2000, we entered into a purchase and exchange agreement with the owners of Aurora Communications to purchase all of their equity interests, and thereby acquire its nine stations, for total consideration of $185.0 million, consisting of $35.0 million in our equity, $85.0 million in cash and $65.0 million in assumed debt. The cash amount is subject to a working capital adjustment. We have irrevocably deposited $7.0 million toward the purchase of Aurora Communications. WODE (FM) and WEEX (AM), Allentown, Pennsylvania. On February 29, 2000, we entered into an asset purchase agreement with Clear Channel to purchase these stations for total cash consideration of $30.0 million. We have irrevocably deposited $6.0 million toward the purchase of these stations. WCHR (FM), Manahawkin, New Jersey. On August 18, 1999, we entered into a stock purchase agreement with the owners of all the outstanding stock of Manahawkin Communications Corporation, the holder of a construction permit in the Monmouth-Ocean market, for total cash consideration of $4.7 million, of which $2.0 million has been paid. This permit allows the holder to construct and operate a radio station on a temporary basis. Once the radio station has begun operating, the holder can apply to the FCC for a broadcast license. WJHR (AM), Flemington, New Jersey. On January 21, 1999, we entered into an asset purchase agreement with Multicultural Radio Broadcasting, Inc. to purchase this radio station for total cash consideration of $2.5 million. We have irrevocably deposited $130,000 toward the purchase of this station. WTSX (FM) and WDLC (AM), Newburgh-Middletown, New York. On August 7, 1998, we entered into an asset purchase agreement with Port Jervis Broadcasting Co., Inc., to acquire these radio stations for total cash consideration of approximately $2.7 million. We have irrevocably deposited $600,000 toward the purchase of these stations. 20 WCHR (AM) and WNJO (FM), Trenton, New Jersey. On August 30, 1996, we entered into an asset purchase agreement with Great Scott Broadcasting Ltd. to acquire these radio stations for total cash consideration of $20.0 million. We have either paid or placed in escrow the full acquisition price of these stations. WOBM (FM) and WOBM (AM), Toms River, New Jersey and Lakewood, New Jersey. On July 1, 1996, we entered into a stock purchase agreement to purchase all of the outstanding stock of North Shore Broadcasting Corp. and Seashore Broadcasting Corp., the owners of these stations, for total cash consideration of $21.0 million. We have irrevocably deposited $3.4 million toward the purchase of these stations and paid a total of $4.6 million in scheduled monthly payments, which we expensed as local marketing agreement fees, and which also constitute a credit against the purchase price. 21 USE OF PROCEEDS We estimate that the net proceeds from the sale of 12,425,000 shares of our class A common stock, after deducting the underwriting discount and estimated offering expenses, will be approximately $200.7 million, assuming an initial offering price of $17.50 per share, the midpoint of the range set forth on the cover page of this prospectus. If the underwriters exercise their over- allotment options in full, we estimate that the net proceeds we will receive will be approximately $231.1 million. We will use the net proceeds in the following manner: . $60.0 million plus approximately $2.5 million of accretion and early redemption premium to redeem all of our outstanding senior discount notes issued to redeem subordinated discount notes held by some of our existing stockholders and to repay a portion of the borrowings under our old credit facility; . $85.0 million to finance a portion of the acquisition of Aurora Communications; . $24.0 million to finance a portion of the acquisition of the Allentown stations; . $10.7 million to reimburse the limited partners of our predecessor for tax payable by them as a result of our reorganization; and . the remainder to pay transaction costs and for general corporate purposes. The following table illustrates how we intend to finance the acquisitions of Aurora Communications and the Allentown stations:
Sources of Funds ---------------- New credit facility..... $ 58,000,000 This class A common stock offering......... 109,000,000 ------------ Total................... $167,000,000 ============
Uses of Funds ------------- Aurora Communications Acquisition........ $143,000,000(1)(2) Acquisition of Allentown stations........... 24,000,000(3) ------------ Total............... $167,000,000 ============
- -------- (1) These amounts are subject to a working capital adjustment. (2) Reflects $185.0 million purchase price less (a) $7.0 million that we have irrevocably deposited toward the Aurora Communications purchase price and (b) $35.0 million that we expect to pay for in shares of our class C common stock. (3) Reflects $30.0 million purchase price less $6.0 million that we have irrevocably deposited toward the purchase price of these stations. If the Aurora Communications or the Allentown stations acquisitions do not close, then we will use the proceeds intended for these transactions to pay down additional debt, possibly to finance other acquisitions, to provide for general corporate purposes or for any combination of these proposed uses. Other than the pending acquisitions described elsewhere in this prospectus, we have not entered into any agreements, arrangements or understandings to proceed with any acquisitions. Pending these uses, we intend to invest the net proceeds in U.S. government securities or other interest bearing short-term investment grade securities. DIVIDEND POLICY We do not expect to pay any cash dividends or distributions on our capital stock for the foreseeable future. We currently intend to retain future earnings, if any, to finance the expansion of our business. Our credit facility restricts our ability to pay cash dividends. 22 CAPITALIZATION The following table sets forth our actual capitalization as of March 31, 2000, our capitalization as adjusted to give effect to the recapitalization and reorganization and the offering but not the application of the proceeds from this offering as contemplated, and our pro forma capitalization, as adjusted, as of March 31, 2000 as if the following events that occurred or will occur after March 31, 2000 occurred on March 31, 2000: . our recapitalization and reorganization; . the completion of this offering and the application of the net proceeds as contemplated; . the completion of our acquisition of Aurora Communications; . the completion of our acquisition of the Allentown stations; . the completion of our acquisitions of WILT (AM) and WCHR (FM); and . the completion of our acquisitions of seven stations that we currently operate under local marketing agreements. You should read this table together with the historical financial statements and related notes, the unaudited pro forma consolidated financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.
As of March 31, 2000 ---------------------------- (unaudited) (dollars in thousands) Pro Forma, As As Actual Adjusted Adjusted -------- -------- -------- Cash and cash equivalents........................ $ 2,397 $112,381 $ 1,883 ======== ======== ======== Old credit facility.............................. $ 56,139 $ -- $ -- New credit facility.............................. -- 33,100 111,100 Senior discount notes............................ -- -- -- Subordinated discount notes...................... 40,159 -- -- Other debt....................................... 1,114 1,114 1,114 -------- -------- -------- Total long-term debt......................... 97,412 34,214 112,214 Partners' deficit................................ (21,489) Stockholders' equity (1): Preferred stock, $.01 par value; 10,000,000 shares authorized; none issued and outstanding................................... -- -- -- Class A common stock, $.01 par value; 67,000,000 shares authorized; 12,544,419 shares issued and outstanding as adjusted; 12,519,256 shares issued and outstanding pro forma as adjusted............................. -- 125 125 Class B common stock, $.01 par value; 15,000,000 shares authorized; 4,780,931 shares issued and outstanding as adjusted; 3,773,532 shares issued and outstanding pro forma as adjusted...................................... -- 48 38 Class C common stock, $.01 par value; 8,000,000 shares authorized; 761,280 shares issued and outstanding as adjusted; 1,859,017 shares issued and outstanding pro forma as adjusted.. -- 8 18 Paid-in capital................................ -- 155,194 190,194 Accumulated deficit............................ -- (8,122) (8,122) -------- -------- -------- Total stockholders' equity................... -- 147,253 182,253 -------- -------- -------- Total capitalization......................... $ 75,923 $181,467 $294,467 ======== ======== ========
- -------- (1) Does not include (i) 2,309,317 shares of class A common stock issuable upon exercise of options we granted or which we may grant under our 2000 stock incentive plan and (ii) up to 1,863,750 shares of class A common stock issuable upon the exercise of the underwriters' over-allotment options. 23 DILUTION Purchasers of the shares of class A common stock offered by this prospectus will experience an immediate and substantial dilution in net tangible book value per share. Dilution is the amount by which the initial public offering price paid by the purchasers of the shares of our class A common stock will exceed the net tangible book value per share of our common stock after the offering. The net tangible book value per share of our common stock is determined by subtracting total liabilities from the total book value of the tangible assets and dividing the difference by the number of shares of our common stock deemed to be outstanding on the date the book value is determined. As of March 31, 2000, we had a deficit in pro forma net tangible deficiency of approximately $(278,000), or $(0.05) per share, after giving effect to the following, but excluding this offering: . our recapitalization and reorganization; . the completion of our acquisition of Aurora Communications; . the completion of our acquisition of the Allentown stations; . the completion of our acquisitions of WILT (AM) and WCHR (FM); and . the completion of our acquisitions of seven stations that we currently operate under local marketing agreements. Assuming the sale of 12,425,000 shares of our class A common stock at an initial public offering price of $17.50 per share, and deducting the underwriting discount and estimated offering expenses, our pro forma net tangible book value as of March 31, 2000 would have been a deficit of approximately $(93,000), or $(0.01) per share. This represents an immediate increase in pro forma net tangible book value to existing stockholders of $0.04 per share and an immediate dilution to new investors of $17.51 per share. The following table illustrates the per share dilution: Assumed initial public offering price per share................ $17.50 Pro forma net tangible book value deficiency per share as of March 31, 2000.............................................. $(0.05) Increase in pro forma net tangible book value per share attributable to new investors purchasing shares in the offering.................................................... 0.04 ------ Pro forma net tangible book value deficiency per share after the offering.................................................. (0.01) ------ Pro forma dilution per share to new investors.................. $17.51 ======
24 The following table summarizes, on a pro forma basis as of March 31, 2000, the differences between existing common stockholders immediately prior to this offering and new investors purchasing class A common stock in connection with this offering, with respect to the number of shares of our common stock purchased, the total consideration paid and the average price per share paid. The table assumes no exercise of the underwriters' over-allotment options.
Shares Purchased Consideration ------------------ ----------------------- Average Price Number Percent Paid Percent Per Share ---------- ------- ------------ ------- ------------- Existing stockholders... 5,661,630 31.3% $ 500,000(1) 0.2% $0.09 New investors........... 12,425,000 68.7 217,437,500 99.8 17.50 ---------- ----- ------------ ----- Total................. 18,086,630 100.0% $212,937,500 100.0% ========== ===== ============ =====
- -------- (1) In addition to acquiring equity interests in us, some of our existing stockholders purchased $42.4 million of subordinated discount notes from us, which we redeemed on May 4, 2000. The foregoing discussion and tables assume no exercise of any stock options outstanding. There are options outstanding to purchase 309,317 shares of our class A common stock at a weighted average exercise price of $1.21 per share. To the extent that any of these options are exercised, there will be further dilution to the new investors. 25 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA Our historical financial statements and the historical audited financial statements of some of the businesses we plan to acquire are included elsewhere in this prospectus. The unaudited pro forma consolidated financial data presented here should be read together with those financial statements and related notes. The unaudited pro forma consolidated statement of operations data for the year ended December 31, 1999 and for the three months ended March 31, 2000 give effect to the following transactions as if they had occurred on January 1, 1999 and January 1, 2000, respectively: . our recapitalization and reorganization; . the completion of this offering and the application of the net proceeds as described in this prospectus; . the completion of our acquisition of Aurora Communications; . the completion of our acquisition of the Allentown stations; . the completion of our acquisitions of WILT (AM) and WCHR (FM); . the completion of our acquisitions of seven stations that we currently operate under local marketing agreements; and . the sale of our membership interests in Nassau Tower Holdings LLC. The unaudited pro forma consolidated balance sheet as of March 31, 2000 gives effect to those of the transactions listed above that are expected to occur, or have occurred, after March 31, 2000, as if they had occurred on March 31, 2000. We have included all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of this data. We based the pro forma adjustments on available information and on assumptions that we believe are reasonable under the circumstances. The pro forma consolidated financial data are not necessarily indicative of the results of operations or financial position that we would have achieved had the transactions described above occurred on the dates indicated, and should not be construed as being representative of future results of operations. Our results of operations for the three months ended March 31, 2000 and for any future quarters are not necessarily indicative of results that may be expected over the entire year or for any future period. 26 NASSAU BROADCASTING CORPORATION UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS Year Ended December 31, 1999 (dollars in thousands, except per share data)
Nassau Aurora WEBE/ Westchester Capstar Allentown Pro Forma Consolidated Broadcasting Communications(1) WICC(1) Radio(1) Trust(1) Stations Adjustments Pro Forma ------------ ----------------- ------- ----------- -------- --------- ----------- ------------ Gross Revenues......... $34,295 $6,924 $9,106 $ 4,349 $3,586 $ 4,115 $ (807)(2) $ 61,568 Less agency and outside commissions........... 2,893 719 1,083 397 249 368 5,709 ------- ------ ------ -------- ------ ------- ------ ---------- Net Revenues.......... 31,402 6,205 8,023 3,952 3,337 3,747 (807) 55,859 ------- ------ ------ -------- ------ ------- ------ ---------- Operating expenses..... 20,794 3,106 4,113 2,656 2,375 2,281 (96)(2) 35,229 Depreciation and amortization.......... 2,635 825 275 908 317 1,259 11,190 (3) 17,409 Corporate general and administrative expenses.............. 2,280 744 1,867 205 48 103 (2,967)(4) 2,280 Local marketing agreement fees........ 2,517 -- -- -- -- -- (1,817)(5) 700 ------- ------ ------ -------- ------ ------- ------ ---------- 28,226 4,675 6,255 3,769 2,740 3,643 6,310 55,618 ------- ------ ------ -------- ------ ------- ------ ---------- Operating Income...... 3,176 1,530 1,768 183 597 104 (7,117) 241 ------- ------ ------ -------- ------ ------- ------ ---------- Other income (expenses): Investment income..... 2,562 32 -- 7 14 -- (53)(6) 2,562 Gain on sale of assets............... 567 -- -- -- -- (29) 29 (6) 567 Interest expense...... (10,946) (2,137) -- (3,377) -- (1,474) 7,018 (7) (10,916) Loss on impairment of intangibles.......... -- -- -- (13,250) -- -- -- (8) (13,250) ------- ------ ------ -------- ------ ------- ------ ---------- Total Other Income (Expense)............ (7,817) (2,105) -- (16,620) 14 (1,503) 6,994 (21,037) ------- ------ ------ -------- ------ ------- ------ ---------- Net Income (Loss) .... $(4,641) $(575) $1,768 $(16,437) $ 611 $(1,399) $ (123) $ (20,796) ======= ====== ====== ======== ====== ======= ====== ========== Net loss per common share--basic and diluted............... $ (1.15) ========== Weighted average shares outstanding--basic and diluted............... 18,151,805 ==========
- -------- (1) We based the financial information shown for the Aurora Communications stations on the historical audited financial statements of the seller and the seller's predecessor entities as follows: . WEBE/WICC (Divisions of ML Media Partners, L.P.)--WEBE (FM); WICC (AM) for the period January 1, 1999 to August 31, 1999. . Westchester Radio, LLC--WFAS (AM)/WFAS (FM); WFAF (FM) for the period January 1, 1999 to October 26, 1999. . Capstar Trust--WRKI (FM); WAXB (FM); WINE (AM); WPUT (AM) for the period January 1, 1999 to October 26, 1999. (2) We have eliminated tower revenues (807) and expenses (96) to give effect to the sale of our membership interests in Nassau Tower Holdings LLC. 27 (3) We have adjusted depreciation and amortization to (i) eliminate the depreciation and amortization expense recorded by Aurora Communications and the Allentown stations (3,584); (ii) eliminate the depreciation of tower- related assets (43); (iii) eliminate our amortization of deferred finance costs on our old credit facility (560); (iv) record amortization of the financing costs incurred for our new credit facility (617); and (v) record depreciation and amortization expense on the acquisitions as follows: Allocation of Purchase Price
Annual Licenses Depreciation Fixed and and Acquisition Total Assets Goodwill Amortization ----------- -------- ------- -------- ------------ (in thousands) Aurora Communications............... $185,000 $ 6,000 $179,000 $ 9,800 Allentown stations.................. 30,000 5,000 25,000 2,000 WCHR (FM)........................... 4,700 700 4,000 300 Stations currently under local marketing agreements: WJHR (AM)......................... 2,500 1,000 1,500 200 WTSX (FM)/WDLC (AM)............... 2,700 500 2,200 200 WNJO (FM)/WCHR (AM)............... 20,000 1,000 19,000 1,100 WOBM (AM)/WOBM (FM)*.............. 16,400 3,000 13,400 1,100 Professional fees associated with acquisitions....................... 1,100 1,100 60 -------- ------- -------- ------- $262,400 $17,200 $245,200 $14,760 ======== ======= ======== ======= Period of depreciation and amortization....................... 7 yrs 20 yrs ------- -------- Annual expense...................... $ 14,760 $ 2,500 $ 12,260 ======== ======= ========
-------- * The WOBM (AM) and WOBM (FM) asset allocation reflects the fact that we have previously expensed $4,600 of the $21,000 purchase price as local marketing agreement fees. (4) We have eliminated the corporate general and administrative expenses recorded by Aurora Communications and its predecessor entities (2,864) and the Allentown stations (103). (5) We have eliminated local marketing agreement fees for those radio stations that are described as pending acquisitions: WNJO (FM); WCHR (AM); WOBM (AM); WOBM (FM); WTSX (FM); WDLC (AM); WJHR (AM) (1,817). We operate WSBG (FM) and WVPO (AM) under a local marketing agreement, however there is no agreement to purchase these stations. Therefore, we have not eliminated the local marketing agreement fees for WSBG/WVPO (700). (6) We have eliminated investment income recorded by Aurora Communications, WEBE(FM) WICC(AM) and Capstar Trust (53); and have eliminated the loss on sale of assets recorded by the Allentown stations (29). (7) We adjusted interest expense to (i) eliminate interest related to the tower assets (181); (ii) eliminate interest recorded by Aurora Communications, Westchester Radio, and the Allentown stations (6,988); (iii) eliminate interest for the debt that has been fully repaid in connection with our recapitalization (10,404); and (v) record interest at an assumed annual rate of 9.5% on our new credit facility assuming $111.1 million outstanding (10,555). Although we will assume the Aurora Communications senior debt upon closing of the Aurora Communications acquisition, we intend to repay those existing obligations with our new credit facility and proceeds from this offering. (8) The impairment of intangibles was recorded by Westchester Radio LLC. Additional notes: (9) The Aurora Communications purchase agreement requires a termination payment to one of its senior executives in the approximate amount of $1,000. We have not included this amount in the accompanying unaudited pro forma consolidated financial statements. (10) We incurred financing costs in the approximate amount of $3,000 in connection with our new credit facility. Since we redeemed the subordinated discount notes with some of the proceeds of the offering, we did not reflect these expenses in the accompanying unaudited pro forma consolidated financial statements. (11) Prior to the offering, we converted to a corporation which will be subject to income tax at the corporate level. On a pro forma basis, there are net operating losses resulting in no current income tax provision. In addition, we have established a valuation allowance to the extent of the net deferred tax asset, which primarily relates to net operating losses, as it is more likely than not that such deferred tax asset will not be realized based on our history of losses. 28 NASSAU BROADCASTING CORPORATION UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS Three Months Ended March 31, 2000 (dollars in thousands, except per share data)
Nassau Aurora Allentown Pro Forma Consolidated Broadcasting Communications Stations Adjustments Pro Forma ------------ -------------- --------- ----------- ------------ Gross Revenues.......... $ 7,893 $ 5,511 $ 944 $ (126) (1) $ 14,222 Less agency and outside commissions............ 612 551 76 1,239 ------- ------- ----- ------ ---------- Net Revenues........ 7,281 4,960 868 (126) 12,983 ------- ------- ----- ------ ---------- Operating expenses...... 5,318 2,639 515 (17) (1) 8,455 Depreciation and amortization........... 822 756 316 2,658 (2) 4,552 Corporate general and administrative expenses............... 587 568 27 (595) (3) 587 Local marketing agreement fees......... 640 -- -- (465) (4) 175 ------- ------- ----- ------ ---------- 7,367 3,963 858 1,581 13,769 ------- ------- ----- ------ ---------- Operating Income.... (86) 997 10 (1,707) (786) ------- ------- ----- ------ ---------- Other income (expenses): Investment income..... 453 5 -- (5) (5) 453 Gain on sale of assets............... 1,633 -- -- -- 1,633 Interest expense...... (3,024) (1,977) (293) 2,484 (6) (2,810) ------- ------- ----- ------ ---------- Total other income (expenses)......... (938) (1,972) (293) 2,479 (724) ------- ------- ----- ------ ---------- Net Income (Loss) .. $(1,024) $ (975) $(283) $ 772 $ (1,510) ======= ======= ===== ====== ========== Net loss per common share--basic and diluted................ $ (0.08) ========== Weighted average shares outstanding--basic and diluted................ 18,151,805 ==========
- -------- (1) We have eliminated tower revenues (126) and expenses (17) to give effect to the sale of our membership interests in Nassau Tower Holdings LLC. (2) We have adjusted depreciation and amortization expense to (i) eliminate the depreciation recorded by Aurora Communications and the Allentown stations (1,072); (ii) eliminate our amortization of deferred finance costs on our old credit facility (114); (iii) record amortization of the financing costs incurred for our new credit facility (154); and (iv) record depreciation and amortization on the acquisitions as follows: 29 Allocation of Purchase Price
Quarterly Licenses Depreciation Fixed and and Acquisition Total Assets Goodwill Amortization ----------- -------- ------ -------- ------------ (in thousands) Aurora Communications................ $185,000 $6,000 $179,000 $2,450 Allentown stations................... 30,000 5,000 25,000 500 WCHR (FM)............................ 4,700 700 4,000 75 Stations currently under local marketing agreements: WJHR (AM).......................... 2,500 1,000 1,500 50 WTSX (FM)/WDLC (AM)................ 2,700 500 2,200 50 WNJO (FM)/WCHR (AM)................ 20,000 1,000 19,000 275 WOBM (AM)/WOBM (FM)*............... 16,400 3,000 13,400 275 Professional fees associated with acquisitions........................ 1,100 -- 1,100 15 -------- ------ -------- ------ 262,400 17,200 245,200 3,690 ======== ====== ======== ====== Period of depreciation and amortization........................ 7 yrs 20 yrs ------ -------- Quarterly expense.................... $ 3,690 $ 625 $ 3,065 ======== ====== ========
-------- * The WOBM (AM) and WOBM (FM) asset allocation reflects the fact that $4,600 of the $21,000 purchase price has previously been expensed as local marketing agreement fees. (3) We have eliminated the corporate general and administrative expenses recorded by Aurora Communications (568) and the Allentown stations (27). (4) We have eliminated all local marketing agreement fees for those radio stations that are described as pending acquisitions: WNJO (FM); WCHR (AM); WOBM (AM); WOBM (FM); WTSX (FM); WDLC (AM); WJHR (AM); (465). We operate WSBG (FM) and WVPO (AM) under a local marketing agreement, however there is no agreement to purchase these stations. Therefore, we have not eliminated the local marketing agreement fees paid for WSBG (FM)/WVPO (AM) (175). (5) We have eliminated investment income recorded by Aurora Communications (5). (6) We have adjusted interest expense to (i) eliminate interest related to the tower assets (29); (ii) eliminate interest recorded by Aurora Communications (1,977) and the Allentown stations (293); (iii) eliminate interest for the debt that has been fully repaid in connection with our recapitalization (2,599); (iv) eliminate the expense of our subordinated discount notes associated with our old credit facility (225); and (v) record interest at an assumed annual rate of 9.5% on our new credit facility assuming $111.1 million outstanding (2,639). Although we will assume the Aurora Communications senior debt upon closing of the Aurora Communications acquisition, we intend to repay those existing obligations with our new credit facility and proceeds from this offering. Additional notes: (7) The Aurora Communications purchase agreement requires a termination payment to one of its senior executives in the approximate amount of $1,000. We have not included this amount in the accompanying unaudited pro forma consolidated financial statements. (8) We incurred financing costs in the approximate amount of $3,000 in connection with our new credit facility. Since we redeemed the subordinated discount notes with some of the proceeds of the offering, we did not reflect these expenses in the accompanying unaudited pro forma consolidated financial statements. (9) Prior to the offering, we converted to a corporation which will be subject to income tax at the corporate level. On a pro forma basis there are net operating losses resulting in no current income tax provision. In addition, we have established a valuation allowance to the extent of the net deferred tax asset, which primarily relates to net operating losses, as it is more likely than not that such deferred tax asset will not be realized based on our history of losses. 30 NASSAU BROADCASTING CORPORATION UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET As of March 31, 2000 (in thousands)
Pro Forma Adjustments For Pro Forma The Acquisitions Adjustments For Pro Forma For Aurora Allentown --------------------------- Nassau The The Communications Stations Eliminate Record Historical Recapitalization Recapitalization Historical Historical Historicals(5) Acquisitions ASSETS ---------- ---------------- ---------------- -------------- ---------- -------------- ------------ Current Assets: Cash.............. $ 2,397 $ (996)(1) $ 1,401 $ 1,636 $ 3 $ (1,639) $(110,498)(6) Marketable securities....... 2,100 (2,100)(1) -- -- -- -- -- Accounts receivable, net.. 5,456 -- 5,456 3,401 544 (3,945) -- Prepaid and other current assets... 652 -- 652 231 -- (231) -- ------- ------- ------- -------- ------- --------- --------- Total Current Assets........... 10,605 (3,096) 7,509 5,268 547 (5,815) (110,498) Property and Equipment, net.... 5,672 -- 5,672 5,662 1,120 (6,782) 17,200 (7) Other Assets: Deferred costs, net............... 1,040 5,660 (2) 6,700 2,089 -- (2,089) -- Intangibles, net... 26,317 -- 26,317 91,459 25,356 (116,815) 245,200 (7) Deposits........... 38,902 -- 38,902 -- -- -- (38,902)(6) Other Assets....... 150 -- 150 -- -- -- -- ------- ------- ------- -------- ------- --------- --------- TOTAL ASSETS...... $82,686 $ 2,564 $85,250 $104,478 $27,023 $(131,501) $ 113,000 ======= ======= ======= ======== ======= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued expense.......... $ 1,705 $ -- $ 1,705 $1,443 $ 104 $ (1,547) $ -- Distributions payable.......... 5,000 5,000 -- -- -- -- Capitalized lease obligations, current.......... 472 -- 472 -- -- -- -- ------- ------- ------- -------- ------- --------- --------- Total Current Liabilities...... 2,177 5,000 7,177 1,443 104 (1,547) -- Senior Debt........ 56,139 (6,539)(3) 49,600 50,873 -- (50,873) 78,000 (6) Subordinated Debt.. 40,159 17,219 (3) 57,378 14,206 -- (14,206) -- Capitalized Lease Obligations, Long Term.............. 642 -- 642 -- -- -- -- Deferred Income.... 5,058 -- 5,058 -- -- -- -- ------- ------- ------- -------- ------- --------- --------- Total Liabilities.... 104,175 15,680 119,855 66,522 104 (66,626) 78,000 ------- ------- ------- -------- ------- --------- --------- Stockholders' Equity: Common stock...... -- -- -- -- -- -- 13 (6) Additional paid in capital.......... -- -- -- -- 34,987 (6) Partners' deficit.......... (21,489) (13,116)(4) (34,605) 37,956 -- (37,956) -- Parent company investment account.......... -- -- -- -- 26,919 (26,919) -- Accumulated deficit.......... -- -- -- -- -- -- -- ------- ------- ------- -------- ------- --------- --------- Total Stockholders' Equity (Deficiency) .... (21,489) (13,116) (34,605) 37,956 26,919 (64,875) 35,000 ------- ------- ------- -------- ------- --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............ $82,686 $ 2,564 $85,250 $104,478 $27,023 $(131,501) $ 113,000 ======= ======= ======= ======== ======= ========= ========= Pro Forma Adjustments For The Consolidated Offering(8) Pro Forma ASSETS --------------- ------------ --- Current Assets: Cash.............. $110,980 $ 1,883 Marketable securities....... -- -- Accounts receivable, net.. -- 5,456 Prepaid and other current assets... -- 652 --------------- ------------ Total Current Assets........... 110,980 7,991 Property and Equipment, net.... -- 22,872 Other Assets: Deferred costs, net............... (3,000)(9) 3,700 Intangibles, net... -- 271,517 Deposits........... -- -- Other Assets....... -- 150 --------------- ------------ TOTAL ASSETS...... $107,980 $306,230 =============== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued expense.......... $ -- $ 1,705 Distributions payable.......... -- 5,000 Capitalized lease obligations, current.......... -- 472 --------------- ------------ Total Current Liabilities...... -- 7,177 Senior Debt........ (16,500) 111,100 Subordinated Debt.. (57,378) -- Capitalized Lease Obligations, Long Term.............. -- 642 Deferred Income.... -- 5,058 --------------- ------------ Total Liabilities.... (73,878) 123,977 --------------- ------------ Stockholders' Equity: Common stock...... 168 (10) 181 Additional paid in capital.......... 155,207 (10) 190,194 Partners' deficit.......... 34,605 (10) -- Parent company investment account.......... -- -- Accumulated deficit.......... (8,122)(10) (8,122) --------------- ------------ Total Stockholders' Equity (Deficiency) .... 181,858 182,253 --------------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............ $107,980 $306,230 =============== ============
footnotes on following page 31 - -------- (1) Cash used in the recapitalization resulted from (i) the proceeds of our senior discount notes and our new credit facility (109,600); (ii) liquidation of marketable securities as required by the new credit facilities (2,100); (iii) repayment of our old credit facility and our subordinated discount notes (100,538); (iv) the payment of a redemption of some equity interests and a preferred distribution to Louis F. Mercatanti, Jr. (5,458); and (v) the financing costs incurred in the recapitalization (6,700). (2) We expensed previously deferred financing costs on our old credit facility (1,040) and deferred financing costs incurred in our recapitalization (6,700). (3) We repaid off our old credit facility (56,139) and our subordinated discount notes (40,159) from the proceeds of our new credit facility (49,600) and our senior discount notes (57,378). (4) The increase in partners' deficit resulting from the recapitalization was due to the (i) distributions to Mr. Mercatanti one of our equity holders (10,458); (ii) the accretion and other costs on the old credit facility (5,280); and (iii) the proceeds allocated to limited partnership units issued in connection with the senior discount notes (2,622). (5) We have eliminated the historical balance sheets of Aurora Communications and the Allentown stations in order to present an allocation of our purchase price in the consolidated pro forma balance sheet. (6) We financed and recorded the acquisitions as follows:
Under Local Aurora Allentown Marketing Communications Stations Agreements Total -------------- --------- ----------- -------- (in thousands) Cash payments................ $ 85,000 $24,000 $ 1,498 $110,498 Application of previously paid deposits............... 7,000 6,000 25,902 38,902 Increase in debt............. 58,000 -- 20,000 78,000 Issuance of common stock..... 35,000 -- -- 35,000 -------- ------- ------- -------- Total...................... $185,000 $30,000 $47,400 $262,400 ======== ======= ======= ========
Professional fees associated primarily with the stations under local marketing agreements, in the approximate amount of $1,100, are included as deposits in the table above. (7) The allocation of the total cost incurred in the acquisition is as follows:
Total Fixed Stations Acquired Cost Assets Intangibles ----------------- -------- ------- ----------- (in thousands) Aurora Communications......................... $185,000 $ 6,000 $179,000 Allentown stations............................ 30,000 5,000 25,000 WCHR (FM)..................................... 4,700 700 4,000 Stations currently under local marketing agreements: WJHR (AM)................................... 2,500 1,000 1,500 WTSX (FM)/WDLC (AM)......................... 2,700 500 2,200 WNJO (FM)/WCHR (AM)......................... 20,000 1,000 19,000 WOBM (AM)/WOBM (FM)*........................ 16,400 3,000 13,400 Professional fees associated with acquisitions................................. 1,100 1,100 -------- ------- -------- $262,400 $17,200 $245,200 ======== ======= ========
-------- * The WOBM (AM) and WOBM (FM) asset allocation reflects the fact that we have previously expensed $4,600 of the $21,000 purchase price as local marketing agreement fees. Fixed assets, which will primarily consist of broadcast equipment, will depreciate over the period of seven years. The intangible amount represents the total cost of the acquisition in excess of the fair value of net assets acquired and includes the FCC licenses. We will amortize the intangible over 20 years. 32 (8) We recorded the offering as follows:
(in thousands) -------------- Gross proceeds (at an assumed offering price of $17.50 per share)..................................................... $217,400 Costs of offering........................................... (16,720) Repayment of senior discount notes.......................... (57,378) Payment of accretion and early redemption premium on senior discount notes............................................. (5,122) Payment of tax distribution to predecessor partners......... (10,700) Reduction in senior debt.................................... (16,500) -------- Net proceeds................................................ $110,980 ======== (9) We wrote off the financing costs associated with our new credit facility when we repaid our old credit facility (3,000). (10) We converted to a corporation immediately prior to this offering. The resulting adjustment to the common stock, paid in capital, and accumulated deficit accounts is as follows: Common stock: 12,519,256 Class A common stock, $0.01 par value.......... $ 125 3,773,532 Class B common stock, $0.01 par value........... 38 600,870 Class C common stock, $0.01 par value............. 5 -------- $ 168 ======== Additional Paid In Capital: Gross proceeds from offering.............................. $217,400 Costs of offering......................................... (16,720) Conversion of partners' capital prior to tax distribution'............................................ (34,605) Tax distribution charged to partners' capital............. (10,700) Portion of proceeds recorded as common stock.............. (168) -------- $155,207 ======== Accumulated Deficit: Accretion of senior discount notes........................ $ (5,122) Write-off of financing costs.............................. (3,000) -------- $ (8,122) ========
33 SELECTED HISTORICAL FINANCIAL DATA The table below sets forth selected historical financial data of Nassau Broadcasting Partners, L.P. and its predecessors, Nassau Broadcasting Company, Inc. and Nassau Broadcasting Holdings, Inc., as of the dates and for the periods indicated. We derived the selected combined statement of operations data for the year ended December 31, 1995 from audited financial statements of Nassau Broadcasting Company, Inc. and Nassau Broadcasting Holdings, Inc. which are not included in this prospectus. We derived the selected consolidated statement of operations data for the year ended December 31, 1996 and the consolidated balance sheet data as of December 31, 1995, 1996 and 1997 from audited financial statements of Nassau Broadcasting Partners, L.P. which are not included in this prospectus. We derived the statement of operations data for the years ended December 31, 1997, 1998 and 1999 and the balance sheet data as of December 31, 1998 and 1999 from audited financial statements of Nassau Broadcasting Partners, L.P. and are included elsewhere in this prospectus. We derived the statement of operations data for the three months ended March 31, 1999 and 2000 and the balance sheet data as of March 31, 2000 from the unaudited financial statements of Nassau Broadcasting Partners, L.P. which, in the opinion of management, have been prepared on the same basis as the audited financial statements and reflect all adjustments, consisting of normal recurring adjustments, which are necessary for a fair presentation of this data. Results for the three-month period ended March 31, 2000 are not necessarily indicative of results that may be expected for the entire year or for any future period. You should read the following data in conjunction with the historical financial statements and related notes, the unaudited pro forma consolidated financial statements and related notes, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.
Three Months Year Ended December 31, Ended March 31, --------------------------------------------- ------------------ 1995 1996 1997 1998 1999 1999 2000 ------- ------- ------- ------- --------- ------- --------- (unaudited) (dollars in thousands) Statement of Operations Data: Gross revenues.......... $ 5,999 $12,906 $20,891 $27,349 $ 34,295 $ 6,811 $ 7,893 Less agency and outside commissions............ 487 1,082 1,812 2,353 2,893 544 612 ------- ------- ------- ------- --------- ------- --------- Net revenues.......... 5,512 11,824 19,079 24,996 31,402 6,267 7,281 ------- ------- ------- ------- --------- ------- --------- Operating expenses...... 3,916 7,001 13,437 17,227 20,794 4,570 5,318 Depreciation and amortization........... 274 851 2,139 2,364 2,634 603 822 Corporate general and administrative expenses............... 370 1,583 1,995 1,825 2,280 500 587 Local marketing agreement fees......... -- 1,307 1,666 2,271 2,517 725 640 ------- ------- ------- ------- --------- ------- --------- Total operating expenses............. 4,560 10,742 19,237 23,687 28,225 6,398 7,367 ------- ------- ------- ------- --------- ------- --------- Operating income (loss)............. 952 1,082 (158) 1,309 3,177 (131) (86) ------- ------- ------- ------- --------- ------- --------- Other income (expenses) Investment income..... -- -- 530 992 2,562 154 453 Gain on sale of assets............... -- -- -- 3,176 567 141 1,633 Interest expense...... (1,351) (2,334) (6,367) (8,781) (10,946) (2,718) (3,024) Settlement expense.... (691) Write-off of debt offering costs....... -- (851) -- -- -- -- -- Special management fee.................. -- -- (744) -- -- -- -- ------- ------- ------- ------- --------- ------- --------- Total other income (expenses)......... (2,042) (3,185) (6,581) (4,613) (7,817) (2,423) (938) ------- ------- ------- ------- --------- ------- --------- Loss before extraordinary item..... (1,090) (2,103) (6,739) (3,304) (4,640) (2,554) (1,024) Extraordinary loss on early retirement of debt................... -- -- -- (677) -- -- -- ------- ------- ------- ------- --------- ------- --------- Net loss............ $(1,090) $(2,103) $(6,739) $(3,981) $ (4,640) $(2,554) $ (1,024) ======= ======= ======= ======= ========= ======= ========= Pro forma: Basic and diluted loss per common share..... $ (0.82) $ (0.18) ========= ========= Weighted average shares outstanding used in determining net loss per share... 5,661,630 5,661,630 ========= =========
34
Three Months Ended March Year Ended December 31, 31, -------------------------------------------- --------------- 1995 1996 1997 1998 1999 1999 2000 ------- -------- -------- ------ ------- ------- ------ (unaudited) (in thousands) Other Data: Broadcast cash flow..... $ 1,596 $ 4,823 $ 5,642 $7,769 $10,608 $ 1,697 $1,963 EBITDA.................. 1,226 3,240 3,647 5,944 8,328 1,197 1,376 After-tax cash flow..... (816) (1,252) (4,600) (4,116) (2,573) (2,093) (1,835) Net cash provided by (used in) Operating activities.. (897) (1,402) (3,600) (1,041) (233) 117 27 Investing activities.. (3,480) (28,021) (18,334) 3,535 (8,300) (6,905) (4,487) Financing activities.. 4,341 33,893 17,172 3,847 2,071 (536) (6,269)
As of As of December 31, March 31, --------------------------------------------- ----------- 1995 1996 1997 1998 1999 2000 ------- ------- ------- -------- -------- ----------- (unaudited) (in thousands) Balance Sheet Data: Cash and cash equivalents............ $ 1,000 $ 5,471 $ 747 $ 7,050 $ 587 $ 2,397 Working capital......... 612 7,018 6,046 12,857 7,278 8,428 Total assets............ 9,599 44,503 57,445 70,694 74,768 82,686 Total indebtedness...... 14,179 50,113 65,299 82,808 90,445 97,412 Partners' deficit....... (5,789) (7,793) (9,032) (15,595) (19,510) (21,489)
35 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis together with "Unaudited Pro Forma Consolidated Financial Data," "Selected Historical Financial Data" and the financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. The statements are based on current expectations and actual results could differ materially from those discussed here. Factors that could cause or contribute to such difference include, but are not limited to, those discussed below and elsewhere in this prospectus, particularly in the "Risk Factors" section. Overview We were founded in December 1986 with the purchase of WPST (FM) and WHWH (AM) in Trenton, New Jersey by Louis F. Mercatanti, Jr., our President and Chief Executive Officer. With the enactment of the Telecommunications Act of 1996, industry deregulation has allowed us to create a unified regional radio broadcasting group with 21 clustered radio stations. Today, we are a radio broadcasting company focused on building local radio station clusters in demographically attractive suburban areas surrounding major metropolitan markets in the northeastern United States. We currently own and/or operate 11 FM and 10 AM stations in five markets. We are currently in the process of acquiring Aurora Communications, LLC, which operates nine stations in three markets, and two Allentown stations from Clear Channel Communications, Inc. Following these and other pending acquisitions, we will own and/or operate 17 FM and 15 AM stations in nine markets. We have increased the net revenues and broadcast cash flow of our stations resulting in 21.0% and 33.0% two-year compound annual same station broadcast cash flow growth, respectively. For the year ended December 31, 1999, giving pro forma effect to our recent tower-related asset sale, our recapitalization and reorganization, this offering and our pending acquisitions, as if we had completed these transactions as of January 1, 1999, we would have had net revenues of $55.9 million, broadcast cash flow of $20.6 million and a net loss of $20.8 million. For the three months ended March 31, 2000, giving pro forma effect to our recent tower-related asset sale, our recapitalization and reorganization, this offering and our pending acquisitions, as if we had completed these transactions as of January 1, 2000, we would have had net revenues of $13.0 million, broadcast cash flow of $4.5 million and a net loss of $1.5 million. In May 2000, we undertook a recapitalization in which we: . entered into a new credit facility that provides for borrowings of up to $144.0 million; . issued and sold units consisting of senior discount notes and limited partnership units for gross proceeds of $60.0 million. The limited partnership units were converted into 119,419 shares of our class A common stock as of the date of this offering; . repaid all outstanding obligations under our old credit facility and redeemed all our $42.4 million of outstanding subordinated discount notes which we had issued to our existing stockholders; and . redeemed $7.5 million of equity interests of, and paid a $2.9 million preferred distribution to, Mr. Mercatanti, who is also one of our stockholders. Until immediately prior to this offering, we were a limited partnership whose principal subsidiaries were single-member limited liability companies. The limited partnership, Nassau Broadcasting Partners, L.P., was a flow-through entity for federal and some state and local income tax purposes, and the limited liability companies were disregarded for federal and some state and local tax purposes. As a result, our equity holders, rather than us, had reported, and had been taxed directly with respect to our net income (loss) for federal and some state and local income tax purposes. In connection with this offering, we have terminated our limited partnership status and have become subject to federal and applicable state and local corporate income tax as a subchapter C corporation. 36 We derive all of our revenue from the sale of broadcasting time on our radio stations for advertising. As a result, our revenue is affected primarily by the advertising rates our radio stations charge. Our radio stations base these advertising rates primarily on the station's ability to attract listeners in a given market and on the attractiveness to advertisers of the station's listener demographics. Rates vary depending upon a program's popularity among the listeners an advertiser is seeking to attract, the number of advertisers vying for available air time and the availability of advertising time on other radio stations and alternative media in the market. Radio advertising rates generally are highest during the morning and afternoon drive-time hours which are the peak hours for radio listening. The number of advertisements that a radio station can broadcast within any given time period without jeopardizing listener levels, and the resulting ratings, are limited in part by the format of that station. Each of our stations has a general predetermined level of on- air inventory that it makes available for advertising. Available inventory may vary at different times of the day but tends to remain stable over time. We base much of our selling activity on demand for our radio stations' on-air inventory and, in general, we respond to this demand by varying prices rather than by changing the available inventory. Radio stations often utilize trade or barter agreements to exchange advertising time for goods or services, such as other media advertising, travel or lodging, in lieu of cash. In order to preserve most of our on-air inventory for cash advertising, we generally enter into trade agreements only if we will use the goods or services bartered to us in our business. We have minimized our use of trade agreements and in 1999 we sold over 96% of our advertising time for cash. In addition, we generally do not preempt advertising spots paid for in cash with advertising spots paid for in trade. Historically, our broadcast revenues have varied through the year. As is typical in the radio broadcasting industry, we expect our first calendar quarter to produce the lowest revenues for the year, and we expect the fourth calendar quarter to produce the highest revenues for the year. The incurrence of advertising and promotion expenses that do not necessarily produce commensurate revenues until the impact of the advertising and promotion is realized in future periods may affect our operating results in any period. In 1999, we derived approximately 75% of our gross revenues from the sale of local advertising, and approximately 25% from the sale of national advertising. We value local advertising, which is sold primarily by each station's sales staff, because it represents a stable revenue source which is less affected by economic downturns. We receive higher rates for national advertising and consequently we also focus on obtaining national advertisers. However, we believe that the volume of national advertising revenue is more susceptible to changes in the economic environment and a less reliable source over the long-term. To generate national advertising sales, we engage Katz Communications, Inc., a national advertising representation firm. In addition, we have created a division called Nassau Radio Network to market to national advertisers the importance of utilizing our radio stations to complement any New York-Philadelphia radio schedule. In 1999, no single advertiser accounted for more than 1% of our gross revenue. Our operating expenses are primarily sales commissions and programming, engineering, advertising and promotional expenses. We aim to control these expenses by working closely with local station management. We typically collect our advertising revenue within 120 days of the date on which we air the related advertisement. We pay most accrued expenses, however, within 45 to 60 days. As a result of this time lag, as we grow, we require more working capital and we are likely to continue to require more in the future. We have generated net losses primarily as a result of significant charges for depreciation and amortization relating to the acquisition of radio stations and interest charges on outstanding debt. Based upon the large number of acquisitions we expect to consummate within the next six months, we anticipate that depreciation and amortization charges will continue to be significant for several years. Historically, we have amortized FCC licenses and goodwill attributable to the acquisition of radio stations over a 40 year period. Going forward, we plan to amortize FCC licenses and goodwill attributable to acquisitions over a 20 year 37 period. To the extent that we complete additional acquisitions, our interest expense and depreciation and amortization charges are likely to increase. If this occurs, we would expect to continue to incur net losses. We measure our ability to generate broadcast cash flow and EBITDA, as is customary in our industry. Broadcast cash flow consists of operating income (loss) before depreciation and amortization, corporate general and administrative expenses and local marketing agreement fees. "EBITDA" consists of operating income (loss) before depreciation and amortization expense and local marketing agreement fees. Broadcast cash flow and EBITDA, as we define them, may not be comparable to similarly titled measures used by other companies. Although broadcast cash flow and EBITDA are not measures of performance calculated in accordance with generally accepted accounting principles, we believe that they are accepted by the broadcasting industry as generally recognized measures of performance and are used by analysts who report publicly on the operating performance of radio broadcasting companies. Nevertheless, you should not consider these measures in isolation or as a substitute for operating income, net income, net cash provided by operating activities or any other measure for determining our operating performance or liquidity that is calculated in accordance with generally accepted accounting principles. Our financial results are dependent on a number of factors, including the general strength of the local and national economies, population growth, the ability to provide popular programming, local market competition, the relative efficiency of radio broadcasting compared to other media, signal strength and government regulation and policies. Results of Operations Three months ended March 31, 2000 compared to three months ended March 31, 1999 Net revenues for the three months ended March 31, 2000 were $7.3 million compared to $6.3 million for the three months ended March 31, 1999, an increase of 16.2%. Of this increase, approximately $200,000 is attributable to an increase in advertisements sold by our developing stations. The balance of the increase predominantly results from increases in rates charged by the remainder of our stations. Operating expenses for the three months ended March 31, 2000 were $5.3 million compared to $4.6 million for the three months ended March 31, 1999, an increase of 16.4%. The increase was attributable primarily to continuing investments in our programming, which amounted to approximately $260,000, an increase of approximately $261,000 in selling expenses and an increase of $128,000 in general and administrative expense in operating the stations. Depreciation and amortization expense for the three months ended March 31, 2000 was $822,000 compared to $603,000 for the three months ended March 31, 1999, an increase of 36.3%. This increase reflected the amortization of goodwill associated with the acquisition of WNJO (FM), which amounted to approximately $198,000 in the quarter ended March 31, 2000. Corporate general and administrative expenses for the three months ended March 31, 2000 were $587,000 compared to $500,000 for the three months ended March 31, 1999, an increase of 17.4%. This increase was attributable primarily to investment in additional personnel necessary to manage our growing radio station portfolio, of approximately $39,000, and an increase in travel and entertainment expenses of approximately $30,000. Local marketing agreement fees for the three months ended March 31, 2000 were $640,000 compared to $725,000 for the three months ended March 31, 1999, a decrease of 11.7%. The decrease reflected a reduction in the amount of local marketing agreement fees we paid for WNJO (FM) and WCHR (AM) in the amount of approximately $150,000. This decrease was partially offset by an increase in fees we paid for WOBM (FM)/WOBM (AM), WJHR (AM), WTSX (FM) and WDLC (AM) totaling approximately $65,000. 38 As a result of the factors described above, our operating loss for the three months ended March 31, 2000 was $86,000 compared to $131,000 for the three months ended March 31, 1999, a decrease of 34.4%. Other expenses for the three months ended March 31, 2000 were $938,000 compared to $2.4 million for the three months ended March 31, 1999. The change is attributable primarily to the gain recognized in the sale of all our membership interests in Nassau Tower Holdings LLC. As a result of the factors described above, our net loss for the three months ended March 31, 2000 was $1.0 million compared to a net loss of $2.6 million for the three months ended March 31, 1999. Year ended December 31, 1999 compared to year ended December 31, 1998 Net revenues for the year ended December 31, 1999 were $31.4 million compared to $25.0 million for the year ended December 31, 1998, an increase of 25.6%. Of this increase, approximately $3.2 million is attributable to an increase in advertising sold by our developing stations. The balance of the increase predominantly results from increases in rates charged by the remainder of our stations. Operating expenses for 1999 were $20.8 million compared to $17.2 million for 1998, an increase of 20.7%. The increase was due to increased investments in programming of approximately $735,000, increased advertising and promotion expenditures of approximately $400,000 and increased sales expenses of approximately $1,700,000 which was associated with higher revenues. Depreciation and amortization expense for 1999 was $2.6 million compared to $2.4 million for 1998, an increase of 11.5%. This increase reflected the write-off of deferred financing costs associated with our old credit facility of approximately $65,000 and amortization of goodwill associated with the acquisitions of WNJO (FM) and WCHR (AM) of approximately $133,000. Corporate general and administrative expenses for 1999 were $2.3 million compared to $1.8 million for 1998, an increase of 24.9%. The increase was attributable primarily to an increase in salaries we paid of approximately $300,000, an increase in professional fees paid of approximately $80,000 and an increase in travel and entertainment expenses of approximately $69,000. Local marketing agreement fees for 1999 were $2.5 million compared to $2.3 million in 1998, an increase of 10.8%. The increase was due primarily to the local marketing agreement initiated in January 1999 for WJHR (AM). Operating income for 1999 was $3.2 million compared to $1.3 million in 1998, an increase of 142.6%. This increase was primarily attributable to the strong revenue growth coupled with management's control of expenses. Other expenses for 1999 were $7.8 million compared to $4.6 million in 1998. This increase was attributable to the gain recognized on the sale of WSBG (FM) and WVPO (AM) in 1998. As a result of the factors described above, our net loss for 1999 was $4.6 million compared to $4.0 million in 1998. 39 Year ended December 31, 1998 compared to year ended December 31, 1997 Net revenues for the year ended December 31, 1998 were $25.0 million compared to $19.1 million for the year ended December 31, 1997, an increase of 31.0%. 1998 also included a full twelve months of operating results for WBBO (FM) which went on the air in May 1997. WNJO (FM) and WCHR (AM) were successfully switched to new formats in mid-1998. The increase in net revenues derived from these developing properties was approximately $3.0 million. The balance of the increase was predominantly, attributable to rates charged by the remainder of our stations. Operating expenses for 1998 were $17.2 million compared to $13.4 million in 1997, an increase of 28.2%. The increase attributable to the commencement of operation of WNJO (FM), WCHR (AM), WBBO (FM) in 1998 was approximately $2.0 million. Selling expenses also increased by $1.7 million due to increased sales. Depreciation and amortization expense for 1998 was $2.4 million compared to $2.1 million for 1997, an increase of 10.5%. The increase was attributable primarily to the full year of depreciation and amortization expense associated with the radio stations acquired in 1997. Corporate general and administrative expenses were $1.8 million in 1998 compared to $2.0 million in 1997, a decrease of 8.5%. This decrease was attributable primarily to a reduction in fees paid under a management consulting agreement which terminated in 1997. Local marketing agreement fees were $2.3 million in 1998 compared to $1.7 million in 1997, an increase of 36.3%. New local marketing agreements were initiated in 1998 for WTSX (FM) and WDLC (AM) in Port Jervis, New York, and WSBG (FM) and WVPO (AM) in Stroudsburg, Pennsylvania. As a result of the factors described above, operating income for 1998 was $1.3 million compared to a loss of $158,000 in 1997. Other expenses were $4.6 million in 1998 and $6.6 million in 1997. The decrease was attributable to the gain recognized on the sale of WSBG (FM) and WVPO (AM) in 1998 which approximated $3.2 million, an increase in investment income of approximately $0.5 million and the management fee paid in 1998. These decreases were partially offset by increased interests expenses of approximately $2.2 million. As a result of the factors described above, our net loss for 1998 was $4.0 million compared to $6.7 million in 1997. Other Operating Data Three months ended March 31, 2000 computed to three months ended March 31, 1999 Broadcast cash flow was $2.0 million for the three months ended March 31, 2000, compared to $1.7 million for the three months ended March 31, 1999, an increase of 15.7%. The increase was predominately due to increase revenues of approximately $1.0 million, which resulted from an increase in advertisements sold by our stations. These additional revenues were partially offset by increased programming, sales and corporate general and administrative expenses in operating the stations. EBITDA was $1.4 million for the three months ended March 1, 2000 compared to $1.2 million for the three months ended March 31, 1999, an increase of 15%. This increase was predominantly due to the reasons set forth in the previous paragraph. In addition, we incurred an additional $90,000 in corporate general and administrative expenses in the three months ended March 2000. The increase primarily related to personnel and travel and entertainment expenses. 40 Year ended December 31, 1999 compared to year ended December 31, 1998 Broadcast cash flow was $10.6 million for 1999 compared to $7.8 million for 1998, an increase of 36.5%. The increase was due to revenues increasing, as a result of more advertising sales, by $6.4 million which were offset by an increase of $3.6 million in operating expenses. Operating expenses increased primarily due to an increased investment in programming, advertising and sales expenses resulting from the higher revenues. EBITDA was $8.3 million for 1999 compared to $5.9 million for 1998, an increase of 40.1%. This increase was predominantly due to the reasons set forth in the previous paragraph. In addition, we incurred an additional $500,000 in corporate general and administrative expenses during 1999 relating to salaries, professional fees and travel and entertainment expenses. Year ended December 31, 1998 compared to year ended December 31, 1997 Broadcast cash flow was $7.8 million for 1998 compared to $5.6 million for 1997, an increase of 37.7%. The increase was due to revenues increasing, as a result of more advertising sales, by $5.9 million which were offset by an increase of $3.8 million in operating expenses. Operating expenses increased primarily due to the commencement of several new stations and an increase in selling expenses relating to increased sales. EBIDTA was $5.9 million for 1998 compared to $3.6 million for 1998, an increase of 63.0%. This increase was predominantly due the reasons set forth in the previous paragraph. Liquidity and Capital Resources Overview. We have financed our acquisitions from one or a combination of the following sources: . our credit facilities; . borrowings from our equity investors and others; . additional equity issuance; . asset sales; and . internally generated cash flow. Our other liquidity needs have been for working capital, debt service, capital expenditures and other general corporate purposes. In the future, we expect that our principal liquidity requirements will be for acquisitions of additional radio stations, working capital, debt service and other general corporate purposes. We expect to finance future acquisitions through a combination of bank borrowings and internally generated funds. We will use the net proceeds from this offering in the following manner: . $60.0 million plus approximately $2.5 million of accretion and early redemption premium to redeem all of our outstanding senior discount notes incurred to repay subordinated discount notes held by some of our existing stockholders and to repay a portion of the borrowings under our old credit facility; . $85.0 million to finance a portion of the acquisition of Aurora Communications; . $24.0 million to finance the acquisition of the Allentown stations; . $10.7 million to reimburse the limited partners of our predecessor for tax payable by them as a result of our reorganization; and . the remainder to pay transaction costs and provide for general corporate purposes. 41 As of March 31, 2000, we held $2.4 million in cash and cash equivalents, held $2.1 million in marketable securities available for sale, and had $1.1 million available under our old credit facility. Our pending acquisitions have an aggregate purchase price of $267.0 million with a remaining cash requirement of $187.2 million. Based on our current debt obligations, we anticipate that our debt service costs for the twelve months ending March 31, 2001 will be $12.0 million. Under our new credit facility, we can currently borrow up to $144.0 million, subject to compliance with financial ratios and covenants. We believe that the net proceeds from this offering, together with the availability under our new credit facility and cash on hand should be sufficient to permit us to meet our financial obligations for at least the next twelve months. We had working capital of $7.3 million at December 31, 1999, $12.9 million at December 31, 1998 and $6.0 million at December 31, 1997. Operating Activities. Our operating activities used $232,881 in 1999 compared to $1.0 million used in 1998. The change relates primarily to improved working capital management in 1999. Investing Activities. Our investing activities used $8.3 million in 1999, primarily for payments due under the purchase agreement for WNJO (FM) and WCHR (AM). Financing Activities. Cash provided by financing activities totaled $2.1 million in 1999. In 1999, we drew against our old credit facility to make payments under existing asset purchase agreements. As of March 31, 2000, we had an outstanding balance under our old credit facility of approximately $56.0 million and availability under our old credit facility of $1.0 million for future acquisitions and other corporate purposes. Giving pro forma effect to the following transactions as of March 31, 2000, and assuming compliance with covenants contained in our new credit facility, we would have had an outstanding balance under our new credit facility of approximately $111.1 million and availability under our new credit facility of $32.9 million for future acquisitions and other corporate purposes: . our recapitalization and reorganization; . the completion of this offering and the application of the net proceeds as contemplated; . the completion of our acquisition of Aurora Communications; . the completion of our acquisition of the Allentown stations; . the completion of our acquisitions of seven radio stations that we currently operate under local marketing agreements; . the completion of our acquisition of Manahawkin Communications Corporation, the owner of a construction permit to build a new radio station, WCHR (FM), in the New Jersey market of Monmouth and Ocean counties; and . the completion of our acquisition of WILT (FM). New Credit Facility. Our new credit facility is secured by substantially all our assets, including our ownership interests in each of our subsidiaries. Our principal operating subsidiary, Nassau Broadcasting I, LLC, is the borrower under our new credit facility. However, we have, and each of our other subsidiaries has, fully and unconditionally guaranteed all of Nassau Broadcasting I, LLC's obligations under this facility. The terms we use below have the meaning given to them in our new credit facility. The new credit facility consists of the following: . $20.0 million revolving credit facility, approximately $4.6 million of which we have drawn in connection with our recapitalization and which we use to provide for general corporate purposes. The revolving credit facility bears interest at the following annual rates: 42 (1) during the periods that the loan is an Alternative Base Rate Loan, the Alternative Base Rate, plus the Applicable Margin, and (2) during the periods that the loan is a LIBOR Loan, for each related Interest Period, the LIBO Rate for the loan for that Interest Period, plus the Applicable Margin. This loan matures in June, 2006. . $33.0 million delayed-draw term loan A1, which we will use to finance a portion of the purchase price of Aurora Communications in the form of repayment of debt of Aurora Communications. This loan bears interest at the following annual rates: (1) during the periods that the loan is an Alternative Base Rate Loan, the Alternative Base Rate, plus the Applicable Margin, and (2) during the periods that the loan is a LIBOR Loan, for each related Interest Period, the LIBO Rate for the loan for that Interest Period, plus the Applicable Margin. This loan will amortize on a quarterly basis and matures in June, 2006. . $26.0 million delayed-draw term loan A2, $5.0 million of which we have drawn in connection with our recapitalization and the remainder of which we will use to finance a portion of the purchase price of stations we currently operate under local marketing agreements. This loan bears interest at the following annual rates: (1) during the periods that the loan is an Alternative Base Rate Loan, the Alternative Base Rate, plus the Applicable Margin, and (2) during the periods that the loan is a LIBOR Loan, for each related Interest Period, the LIBO Rate for the loan for that Interest Period, plus the Applicable Margin. This loan will amortize on a quarterly basis and matures in June, 2006. . $40.0 million term loan B, which we have drawn in connection with our recapitalization and to fund an equity redemption. This loan bears interest at the following annual rates: (1) during the periods that the loan is an Alternative Base Rate Loan, the Alternative Base Rate, plus the Applicable Margin, and (2) during the periods that the loan is a LIBOR Loan, for each related Interest Period, the LIBO Rate for the loan for that Interest Period, plus the Applicable Margin. This loan will have minimal amortization over its life and matures in June, 2007, at which time a balloon payment will be due. . $25.0 million delayed-draw term loan C, which we will use to finance a portion of the purchase price of Aurora Communications in the form of repayment of debt of Aurora Communications. This loan bears interest at the following annual rates: (1) during the periods that the loan is an Alternative Base Rate Loan, the Alternative Base Rate, plus the Applicable Margin, and (2) during the periods that the loan is a LIBOR Loan, for each related Interest Period, the LIBO Rate for the loan for that Interest Period, plus the Applicable Margin. This loan will have minimal amortization over its life and matures in June, 2008, at which time a balloon payment will be due. 43 Our new credit facility prohibits us from paying cash dividends and restricts our ability to make other distributions with respect to our capital stock. Our new credit facility also contains other customary restrictive covenants. Among other things, these covenants limit our ability to: . incur additional indebtedness, contingent liabilities and liens; . redeem or repurchase capital stock and redeem, repurchase or prepay subordinated debt; . enter into certain investments or joint ventures; . consolidate, merge or effect asset sales; . make capital expenditures; . enter sale and leaseback transactions; . sell or discount accounts receivable; . enter into transactions with stockholders and affiliates; or . change the nature of our business. We are also required to satisfy financial covenants, which require us to maintain specified financial ratios and to comply with financial tests, such as ratios for interest coverage, fixed charge coverage and senior and total debt. Our new credit facility contains events of default typical for this type of facility subject in each case to certain grace periods and materiality thresholds, including, without limitation, (1) non-payment of amounts due under the credit facility, (2) material misrepresentations, (3) covenant defaults, (4) cross-defaults to other indebtedness, (5) judgment defaults, (6) bankruptcy, and (7) a change of control of the principal operating company, Nassau Broadcasting I, LLC or its successors. Senior Discount Notes. On May 4, 2000, we issued and sold units consisting of senior discount notes and limited partnership units for gross proceeds of $60.0 million. The limited partnership units were converted into 119,419 shares of class A common stock as of the date of this offering. These senior discount notes will be fully redeemed with the proceeds of this offering. We used the proceeds from these senior discount notes to redeem the subordinated discount notes held by some of our equity holders. Old Credit Facility. On May 4, 2000, we repaid approximately $58.0 million in then-outstanding borrowings under our old credit facility from borrowings under our new credit facility and from proceeds of our senior discount notes. Subordinated Discount Notes, Preferred Distribution and Equity Redemption. On May 4, 2000, we redeemed all outstanding subordinated discount notes that we had issued to our existing stockholders in an amount of $42.4 million and made a preferred distribution to Mr. Mercatanti under the Nassau Broadcasting partnership agreement, in an amount of $2.9 million. In addition, Nassau Broadcasting, L.P. redeemed $2.5 million of equity interests held by Mr. Mercatanti, who also has the right to require us to redeem a further $5.0 million of equity interests at any time provided there is no existing event of default under our new credit facility and no new event of default would result. Pending Acquisitions. We expect that we will require approximately $222.2 million to fund our pending acquisitions, with a remaining cash requirement of $187.2 million. We cannot consummate our pending acquisitions unless we satisfy specified conditions, including approval of the FCC. Although we believe the closing conditions are customary for transactions of this type, we may not satisfy these conditions. We believe that the FCC ultimately will approve the proposed acquisitions, but we cannot be certain of this. Therefore, we do not know when these acquisitions will close, if at all. 44 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 rate and commodity prices. Our primary exposure to market risk is interest rate risk associated with our new credit facility. Amounts that we borrow under the new credit facility incur interest at the Alternate Base Rate or the LIBO Rate plus the then Applicable Margin depending on the outstanding principal balance under our new credit facility. We are required to fix the interest rate of, or enter into interest rate hedging arrangements for, approximately 50% of the aggregate principal amount then outstanding under our new credit facility. Historically, we believe that we have not been exposed to market risk which has had a material adverse effect on our operations. Year 2000 Compliance We have experienced no material problems as a result of the year 2000 issue. We do not anticipate experiencing any latent material problems. We have not incurred, nor do we expect to incur, any material costs to ensure that our systems are year 2000 compliant. Inflation To date, inflation has not materially impacted our results of operations. Recent Pronouncements In September 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," which requires entities to recognize all derivatives in their financial statements as either assets or liabilities measured as fair value. SFAS No. 133 also specifies new methods of accounting for hedging transactions, prescribes the items and transactions that may be hedged and specifies detailed criteria to be met to qualify for hedge accounting. SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal years beginning after June 15, 2000. We are evaluating the impact that this statement will have on our results of operations and financial position. In January 2000, the Emerging Issues Task Force reached a consensus on Issue No. 99-17, "Accounting for Advertising Barter Transactions," to be effective for transactions entered into after January 20, 2000. The consensus states that advertising barter transactions should be accounted for at fair value and that the fair value recognized be disclosed in the financial statements, if there is verifiable objective evidence provided by sufficient cash transactions received by the seller of the advertising or similar advertising. We do not expect EITF No. 99-17 to have a material effect on our financial statements. 45 INDUSTRY OVERVIEW Radio stations generate the majority of their revenue from the sale of advertising time to local and national spot advertisers and national network advertisers. Radio gives advertisers an economy of scale with regard to targeting demographic groups in specific geographic locations compared to other forms of media advertising. As a result, radio broadcasting is affordable to both large and small advertisers, although it serves primarily as a medium for local advertising. According to the Radio Advertising Bureau's Radio and Marketing Guide & Fact Book for Advertisers: Fall 1999 to Spring 2000, from 1990 to 1999, local advertising revenue as a percentage of total radio advertising revenue in the United States has ranged from approximately 77% to 80%. The growth in total radio advertising revenue has been fairly stable in the past six years, growing between approximately 8% and 15% annually. Total radio advertising in 1999 reached an estimated $17.7 billion, which represents almost 15% growth over the prior year. Advertisers consider radio to be an efficient, cost-effective means of reaching specifically identified demographic groups. Stations are typically classified by their on-air format such as country, adult contemporary, oldies or news/talk. A station's format and style of presentation enable it to target particular segments of listeners sharing certain demographic features. By capturing a specific share of a market's radio listening audience, with particular concentration in a targeted demographic group, a station is able to market its broadcasting time to advertisers seeking to reach a defined audience. Advertisers and stations use data published by audience measuring services, such as Arbitron, to estimate how many people within particular geographical markets and demographic groups listen to each station in those markets. In addition, rates vary depending upon a program's popularity among the listeners an advertiser is seeking to attract, the number of advertisers vying for available air time and the availability of alternative advertising media in the market. Radio advertising rates generally are highest during the morning and afternoon drive-time hours which are the peak hours for radio audience listening. The number of advertisements that a station can broadcast without jeopardizing listening levels and the resulting ratings is limited in part by the format of the particular station and the local competitive environment. Although the number of advertisements that are broadcast during any given time period may vary, the total number of advertisements broadcast on a particular station generally does not vary significantly from year to year. A station's local sales staff generates the majority of its local advertising sales through direct solicitations of local advertising agencies and businesses. To generate national advertising sales, a station usually will engage a firm that specializes in soliciting radio-advertising sales on a national level. National sales representatives obtain advertising principally from advertising agencies located outside the station's market and receive commissions based on the revenue from the advertising they obtain. Consumer Reach Radio is a powerful medium through which to reach consumers. Radio is able to reach consumers more frequently than television or cable because it can be listened to outside the home, in cars and in the workplace. According to the Radio Advertising Bureau's Radio and Marketing Guide & Fact Book for Advertisers: Fall 1999 to Spring 2000, radio reaches 75% of consumers 12 years of age and older everyday and with more radio listening occurring outside the home, radio advertising is confronted with less competition in attracting consumers than other mediums of advertising. Every week, radio reaches 95% of all consumers 12 years of age and older. Radio is also the number one medium close to the point of purchase as it reaches 63% of adults 25 to 54 years old within one hour of making their largest purchase of the day. More than 60% of all radio listening is done outside the home, and radio reaches four out of five adults travelling in vehicles each week. The average listener spends approximately three hours and 12 minutes every weekday listening to radio. The highest portion of radio listenership occurs during the morning, 46 particularly between the time a listener wakes up and the time the listener reaches work. Each week, this "morning drive time" period reaches more than 80% of people 12 years of age and older and, as a result, radio advertising sold during this period achieves premium advertising rates. Radio listeners have gradually shifted over the years from AM (amplitude modulation) to FM (frequency modulation) stations. FM reception is generally clearer and provides greater tonal range and higher fidelity than AM reception. FM's listener share is now in excess of 75%, despite the fact that the number of AM and FM commercial stations in the United States is approximately equal. A combination of frequency, transmitter power and antenna orientation determines the area served by AM stations. Power, operating frequency, antenna patterns and day/night operating modes are required to determine the effective service area of an AM station. A combination of transmitter power and antenna height determines the area that an FM station can serve, with stations divided into classes according to their anticipated service area. The class of an FM station determines the minimum and maximum facilities requirements for that station. FM class designations depend upon the geographic zone in which the transmitter of the FM station is located. In general, commercial FM stations are classified as follows, in order of increasing power and antenna height: Class A, B1, C3, B, C2, C1 and C. Class C FM stations operate at 100 kilowatts of power with up to 1,968 feet of antenna elevation above average terrain. They are the most powerful FM stations, providing service to a large area, typically a substantial portion of a state. Class B FM stations operate at up to 50 kilowatts of power with up to 500 feet of antenna elevation. These stations typically serve large metropolitan areas as well as their associated suburbs. Class A FM stations operate at 6 kilowatts with up to 328 feet of antenna elevation, and serve smaller cities and towns or suburbs of larger cities. License Grant and Renewal The FCC grants, and reviews, radio broadcast licenses for maximum terms of eight years. The licensor may renew its license through an application to the FCC. Interested parties, including members of the public, can file petitions to deny license renewal applications. Market and Industry Data and Industry Terms We use the term local marketing agreement in various places in this prospectus. A typical local marketing agreement is an agreement under which an FCC licensee of a radio station makes available, for a fee, air time on its station to another person. This person provides programming to be broadcast during its allocated air time, collects revenues from the advertising it sells for broadcast during its programming and pays related expenses. Unless otherwise indicated: . we based metropolitan statistical areas on the Arbitron Radio Metro and Television Market Population Estimates 1999; . we obtained radio market rankings, radio market revenue rankings, radio market revenue growth and other radio market data from BIA Research, Inc., a recognized broadcasting research firm; . we calculated our revenue rankings in each radio market by aggregating radio revenues of all radio stations in that market, as derived from BIA Research, and calculating each radio station's percentage share of this aggregate revenue. We ranked the radio station with the highest percentage share in the market first in the market, the radio station with the second highest percentage share second in the market, and so forth; . we obtained total industry listener and revenue levels from the Radio Advertising Bureau, a national trade organization; . we derived number of listeners data from the Spring 2000 Arbitron Market Report; 47 . we derived all audience share data and audience rankings, including ranking by population, from surveys of people 12 years of age and older, listening Monday through Sunday, 6 a.m. to 12 midnight, and based on the Spring 2000 Arbitron Market Report pertaining to each market, as reported by BIA Research; and . we obtained all county-wide retail sales information from the 1999 edition of Sales and Marketing Management, a recognized publication containing market and economic research data. 48 BUSINESS We focus on building contiguous clusters of local radio station in demographically attractive suburban areas surrounding major metropolitan markets in the Northeast. Our primary strategy is to capture leadership positions in the markets in which we currently operate and, while growing those markets, also expand to other attractive suburban markets with strong growth opportunities. We attribute our broadcast cash flow growth on a same station basis of 33% over the past two years to our ability to identify and define underdeveloped markets and transform radio stations into competitive local brands. Operating Strategy We intend to grow our business, both internally and through acquisitions, by pursuing the following strategies: Build clusters of stations and operate multiple stations within each market We operate stations in clusters to provide coverage over a series of adjacent markets. In this way, we realize operational efficiencies through a combined sales force and shared support functions for each cluster. In addition, we create larger marketing programs than an individual radio station could otherwise economically afford through joint promotions among our stations. Each cluster of stations presents advertisers with multiple opportunities to reach their target audiences and achieve their marketing objectives. Synergies derived from clustering enable us to present cost efficient solutions to advertisers. If an advertiser desires airtime on several stations, we provide it with one point of contact within our organization and request only one order form. Improve station programming to increase audience share We recognize the importance of focusing on the local community to ensure that our radio stations address the public interest. In many of our markets, we believe that improving the coverage of local stories has filled a void in the community and created audience loyalty. For example, last year we recognized the growing desire for sports coverage in Trenton, New Jersey with the introduction of professional hockey and baseball teams. To respond to this community interest, we established WTTM (AM) in May 1999 as the first all sports station and the exclusive radio broadcaster of ESPN in this market. In addition to focusing on local interests, we also actively participate in community events and charities. We invest in our on-air talent and program directors who monitor the content and advertising on our stations to ensure each station is operating under its designed format. We continually search for ways to improve our programming as we evolve with our listeners. We aim to maintain or improve station ratings, which we believe is essential to achieve consistent growth. We attempt to do this by creating distinct, highly visible profiles for our on-air personalities, particularly those broadcasting during "morning drive-time," which is traditionally between 6:00 am and 10:00 am, weekdays. We recently detected an opportunity to grow the audience for the hot adult contemporary format during the evening hours, a typically weaker time period. We designed an original interactive show built around the radio personality, Roberta, that we believe will captivate a significant number of listeners. Based on the current success in syndicating this program on several of our stations, we intend to syndicate Roberta nationally later this year. Enhance brand awareness We believe brand awareness and brand loyalty are essential to achieving a sizable audience, which attracts advertising revenue. We brand and market individual stations to maintain or improve audience ratings. Creating a brand for a station facilitates the ability of people in the local community to identify with the 49 station. For example, in 1997, we branded WJLK (FM) in the Monmouth-Ocean market as "The POINT." The POINT's concept and design is intended to reflect the lifestyle of its target audience. The station ranks first in its target demographic audience, women 25-54 years old, among all local and New York stations in the Monmouth-Ocean market. Cultivate a broad base of advertisers We focus on the needs of both local and national advertisers by developing a sales force trained to proactively serve local and national advertisers in creative ways. We have an ongoing training program which includes seminars offered by the Radio Advertising Bureau and other industry groups as well as in-house training organized by management. Our sales force seeks to design advertising packages which include those stations in a cluster that best fit an advertiser's needs. We utilize Katz Communications, Inc., or Katz, a national advertising representation firm, to obtain national advertising for our stations. We also use Nassau Radio Network, our own national sales force, to locate additional national advertisers. Acquisition Strategy Identification of target stations We seek to expand our presence by acquiring additional stations in demographically attractive suburban areas surrounding major metropolitan markets, primarily in the Northeast. We target radio markets that are underdeveloped and have lower radio market revenue relative to total retail sales as compared to the national average and/or where radio has historically captured only a small portion of total local advertising for all media. We identify and seek to acquire stations that we believe will enable us to create leadership positions in ratings and format in our existing markets or new, complementary markets and provide us with the opportunity to increase revenues and broadcast cash flow. In executing this strategy, we focus on properties which: . provide a regional fit with our overall portfolio; . provide proximity to larger markets that may lead to increased economic expansion into our markets; . are situated in previously unconsolidated markets with fragmented individual ownership of stations; and . provide the opportunity to assemble a group of stations that have competitive signal strengths and that are diversified in format to provide a wide range of target audiences for advertisers. Integration of acquired stations Since 1995, we have acquired or signed local marketing agreements to operate 19 radio stations. We have developed an efficient process to integrate new stations into our portfolio, culture and operating philosophy. Our integration process consists of the following key elements: . improving local presence of stations through top-quality on-air talent and programming personnel; . building an experienced sales force through continued recruitment and on-going training; and . designing marketing efforts to build brand awareness for each station. We intend to transform stations in our portfolio that currently contribute minimal broadcast cash flow into profitable stations. After identifying an underperforming station, our senior management carefully analyzes the characteristics of the station, including the current programming and the audience's perception of the station, and uses market studies to determine market receptivity for change. In designing a plan to revitalize the 50 station, senior management examines how the station profile fits with our existing portfolio in terms of station reach, format and audience. We then focus on hiring and retaining strong on-air talent and programming personnel to create a dynamic station and garner new listeners. By implementing our acquisition strategy, we have quickly achieved success in many of our markets, such as: WJLK (FM)--Monmouth-Ocean, NJ. After acquiring WJLK (FM) and WQNJ (FM) in October 1996, we began the process of disconnecting the simulcast of WJLK (FM) and WQNJ (FM), while at the same time adjusting the format on WJLK (FM) to hot adult contemporary. In May 1997, we relaunched WQNJ (FM) as WBBO (FM) in a contemporary hit radio format and have since increased combined net revenues of these stations from $3.6 million in 1996 to $7.8 million in 1999. WNNJ (FM)--Sussex, NJ. After acquiring WNNJ (FM) in August 1996, we determined the listeners targeted by the station's hot adult contemporary format were more receptive to our two other adult contemporary stations in the area, WSUS (FM) and WSBG (FM). In 1997, we changed the station's format to classic hits and increased the signal power to 25,000 watts. WNNJ (FM) now shares the number one market position with WSUS (FM) in the 25-54 year old target demographic audience. WNJO (FM)--Trenton, NJ. When we acquired WNJO (FM) in May 1997, the station was broadcasting a religious format. Given the high signal power of 50,000 watts, we believed we could move the religious format to an AM station without losing significant revenue and implement a more popular format on the FM station. In March 1998, we placed the religious format on WCHR (AM) and implemented an oldies format on WNJO (FM). With the addition of this signal, we had two 50,000-watt FM stations in the Trenton market and also a very strong FM presence in the Philadelphia metropolitan market. After the format change, we increased the combined net revenues of WNJO (FM) and WCHR (AM) by 322% over the next two years. Advertising We derive all of our revenue from advertising. Similar to other radio stations, we have a sales force that solicits local advertising and we employ Katz as our national sales representative. Further, we believe that some national businesses, that do not have a direct presence in our markets, represent opportunities for additional, directly-generated advertising revenue. We created a division called Nassau Radio Network to target these advertisers. Nassau Radio Network is a sales force that focuses on conveying to advertisers the importance of utilizing our radio stations to complement a New York or Philadelphia radio advertising schedule. Through Nassau Radio Network, we offer a simple process with flexibility and creativity to adapt to an advertiser's desire to target our affluent suburban markets. With our expansion throughout the Northeast, we intend to expand this concept to supplement any major metropolitan market in which we operate. We believe that through direct advertiser relationships we can better understand the advertiser's business needs and more effectively design an advertising campaign to help the advertiser sell its product. As a result, we pay a higher commission rate to both our local sales staff and Nassau Radio Network sales staff than our national representative for generating sales. Our employees work with our advertisers in each of our markets to produce commercials in our technologically advanced facilities. A radio station charges advertising rates which are based primarily on the station's ability to attract listeners in a given market and on the attractiveness to advertisers of the station's listener demographics. We believe that operating multiple stations in a market enables us to offer a variety of rates to advertisers. We believe we will be able to continue to increase our rates and fully sell our advertising time as new and existing advertisers recognize the desirability of our stations' diverse formats. 51 Each station broadcasts a predetermined number of advertisements each hour with the actual number depending upon the format of a particular station. We determine the number of advertisements broadcast hourly that can maximize each of our station's available revenue dollars without jeopardizing its listener levels. Our revenue mix between local and national advertising varies significantly by market. Currently, approximately 75% of our advertising is local and approximately 25% is national. We believe that local revenues are important as they represent a stable revenue source which is less affected by economic downturns. However, we also view national advertising as important because it generally commands a higher dollar rate for each advertising spot than local advertising. Station Portfolio Our stations are clustered in demographically attractive mid-size suburban areas, particularly those surrounding the New York and Philadelphia metropolitan areas. With this configuration, we can coordinate our sales effort and realize operating efficiencies in our sales, programming, engineering and accounting divisions. We set forth information about our stations and the markets we serve and will serve upon completion of the acquisition of Aurora Communications, the acquisition of the Allentown stations and our other pending acquisitions in the following table. We describe the sources for this information under "Industry Overview."
1993-1998 1999 1999 1999 Radio Market 1999 Stations Radio Group Market Radio Market Average Annual Radio Market --------- Rank in Market Rank Revenue Rank Revenue Growth Revenue Growth FM AM Market Revenue - ------------------------ ------ ------------ -------------- -------------- ---- ---- -------------- Northern(1) Westchester, NY(2)...... 1 2 10.8% 16.8% 2 1 N/A Bridgeport, CT.......... 112 91 8.9% 5.6% 1 1 1 Danbury, CT............. 189 190 5.3% 8.0% 2 2 2 Northwestern Sussex, NJ.............. 239 250 N/A 16.7% 3 1 1 Newburgh-Middletown, NY(3).................. 141 258 0% 9.8% 1 1 5 Wilkes Barre-Scranton, PA..................... 64 77 6.5% 11.3% 1 2 4 Allentown, PA(4)........ 67 76 7.5% 6.8% 1 1 3 Central Trenton, NJ(5).......... 138 100 11.5% 14.6% 2 4 1 Shore Monmouth-Ocean, NJ(6)... 47 83 5.6% 21.3% 4 2 1 ---- ---- Total stations........ 17 15 ==== ====
- -------- (1) Consists of the nine radio stations we expect to own upon our acquisition of Aurora Communications, LLC. (2) Falls within the greater New York market. (3) Consists of the two radio stations we expect to acquire from Port Jervis Broadcasting Co., Inc. (4) Consists of two radio stations we expect to acquire from Clear Channel Communications, Inc. (5) Includes two radio stations we expect to acquire from Great Scott Broadcasting Ltd. and one radio station we expect to acquire from Multicultural Radio Broadcasting, Inc. (6) Includes the construction permit of WCHR (FM), which we will acquire upon our acquisition of Manahawkin Communications Corporation and two radio stations we expect to own upon our acquisition of North Shore Broadcasting Corp. and Seashore Broadcasting Corp. The following is a general description of each of our markets and our radio stations within these markets. We derived information relating to radio market revenue rank, radio market revenue and revenue growth of stations from information reported by BIA Research. 52 WESTCHESTER, NEW YORK 1999 Radio Market Revenue Rank: 2
Target Audience Share Audience Rank Station Date Demographic in Target in Target Call Letters Acquired Format Audience Demographic(1) Demographic(1) - ------------------- -------- ------------------ ------------------- -------------- -------------- WFAS (FM).......... pending Adult contemporary 25-54 Women 5.8 3 WFAF (FM).......... pending Adult contemporary 25-54 Women N/A N/A WFAS (AM).......... pending News/talk/sports 40-64 Women N/A N/A
- -------- (1) Westchester County only. Market Overview Currently radio stations in Westchester County are listed under the New York, New York market. Arbitron is in the process of designating Westchester as a recognized market. Based on 1999 population estimates, it would be the 58th largest radio market in the United States. Westchester Stations Upon receiving final approval from the FCC, we will acquire all the equity interests in Aurora Communications which owns the following three radio stations in Westchester County. WFAS (FM), known to its listeners by its branded name "Westchester Radio," broadcasts on two frequencies--103.9, covering southern Westchester county and 106.3, covering northern Westchester County which is licensed as WFAF (FM). WFAS (FM) targets the 25-54 year old demographic audience with an adult contemporary format and includes local news, Westchester traffic updates, weather, and other local information. We promote the station throughout the year by sponsoring numerous charity events and expositions, which we believe emphasizes our community orientation. WFAF (FM) began simulcasting WFAS (FM) in an adult contemporary format at the end of 1999 in an effort to reduce expenses. We believe that the signal is very viable in the Westchester market and intend to relaunch the station with a new format by the end of 2001. WFAS (AM) broadcasts a news/talk/sports format for Westchester County. Established over 60 years ago, WFAS (AM) was Westchester's first radio station. We position this station as "News/Talk 1230" with local news, traffic and weather information, local and national talk shows, block programming and sports news. In addition, we include daily appearances by local civic, service, and business leaders and spot news coverage, and we participate in community events to promote WFAS (AM) as Westchester's favorite local radio station. BRIDGEPORT, CONNECTICUT 1999 Radio Market Revenue Rank: 91
Target Audience Share Audience Rank Station Date Demographic in Target in Target Call Letters Acquired Format Audience Demographic Demographic - ------------------- -------- ------------------ ------------------- -------------- ------------- WEBE(FM)........... pending Adult contemporary 25-54 Women 10.8% 2 WICC(AM)........... pending Full service 35-64 Women 7.5% 2
Market Overview The Bridgeport radio market ranks 91st in the United States based on 1999 radio market revenue. Radio market revenues in Bridgeport have grown from approximately $12.8 million in 1993 to approximately 53 $20.7 million in 1999, representing a compound average annual revenue growth rate of 8.3%. Radio market revenue grew 5.6% during the year ended December 31, 1999, as compared to the prior year. Bridgeport Stations Upon receiving final approval from the FCC, we will acquire all the equity interests in Aurora Communications, which owns two radio stations in Bridgeport. WEBE (FM) broadcasts an adult contemporary format that we believe has a strong listener following in Fairfield County. Founded in 1982, WEBE (FM) is a Class B FM station, broadcasting at 50,000 watts. As of the Spring 2000 Arbitron Market Report, WEBE (FM) ranked number two in its target demographic audience group of women 25-54 years old. WEBE (FM)'s primary competition is WEZN (FM), which broadcasts an adult contemporary format. WICC (AM), established in 1926, was Bridgeport's first radio station. WICC (AM) has ranked number one among listeners 12 years of age and older in the Bridgeport metropolitan area in six of the last ten Arbitron Market Reports. The station's full-service format includes news and information, long term radio personalities, evening talk shows and weekend specialty shows. Our "Family Breakfast Show" on WICC (AM) ranks number one among listeners 12 years of age and older in all of Fairfield County. DANBURY, CONNECTICUT 1999 Radio Market Revenue Rank: 190
Target Audience Share Audience Rank Station Call Date Demographic in Target in Target Letters Acquired Format Audience Demographic Demographic - ------------------- -------- ------------------- ------------------- -------------- ------------- WRKI(FM)........... pending Album oriented rock 25-54 8.8% 2 WAXB(FM)........... pending Oldies 35-64 3.6% 7 WINE(AM)........... pending Adult standards 50+ 0.8% N/A WPUT(AM)........... pending Adult standards 50+ N/A N/A
Market Overview The Danbury market ranks 190th in the United States based on 1999 radio market revenue. Radio market revenues in Danbury have grown from approximately $5.8 million in 1993 to approximately $8.1 million in 1999, representing a compound average annual revenue growth rate of 5.7%. Radio market revenue grew 8.0% during the year ended December 31, 1999, as compared to the prior year. Danbury Stations Upon receiving final approval from the FCC, we will acquire all the equity interests in Aurora Communications, which owns four radio stations in Danbury. WRKI (FM) is known to listeners by its brandname "I-95." Established in 1957, this station has operated under an album oriented rock format since the 1970s. WRKI (FM) is a Class B FM station, broadcasting at 50,000 watts and covering Fairfield and New Haven Counties, Connecticut, and parts of New York State. The station currently ranks second in its target demographic audience in the Danbury market with an 8.8% share. Overall in Fairfield County, WRKI (FM) has a 10.0% revenue share. WAXB (FM), founded in 1964, currently broadcasts an oldies format and ranks seventh in its target demographic audience in Danbury with a 3.6% audience share. We believe that the station is underperforming and intend to improve its performance by instituting programming changes. 54 WINE (AM) switched from an unsuccessful satellite country format to adult standards at the beginning of this year and is presently the only station broadcasting this format in its market. This format is simulcast on WPUT (AM) to reach a greater audience. We believe that the success of this format on similar signals in similar markets has been proven. WPUT (AM), which was founded in 1958, simulcasts the WINE (AM) adult standards format. SUSSEX, NEW JERSEY 1999 Radio Market Revenue Rank: 250
Target Audience Share Audience Rank Station Call Date Demographic in Target in Target Letters Acquired Format Audience Demographic Demographic - ------------------- -------- ------------------ ------------------- -------------- ------------- WNNJ(FM)........... 8/96 Classic hits 25-54 13.8% 1 WSUS(FM)........... 4/97 Adult contemporary 25-54 13.8% 1 WHCY(FM)........... 3/96 Country 18-49 3.5% 8 WNNJ(AM)........... 8/96 Adult standards 50+ N/A N/A
Market Overview The Sussex market ranks 250th in the United States based on 1999 radio market revenue. Radio market revenues in Sussex have grown from approximately $2.4 million in 1995 to approximately $4.9 million in 1999, representing a compound average annual revenue growth rate of 19.5%. Radio market revenue grew 16.7% during the year ended December 31, 1999, as compared to the prior year. Sussex Stations We own and operate four radio stations, one AM and three FM, in the Sussex market. We requested Arbitron make Sussex a recognized market in 1997. The addition of WHCY (FM) has allowed our sales force to market four stations with different formats and listener bases to advertisers in this market. Of our four stations, two ranked first in 1999 in their respective target demographic audiences. WNNJ (FM) broadcasts a classic hits format. WNNJ (FM)'s signal reaches all of Northwestern New Jersey, the Poconos in Pennsylvania and Orange County in New York. After acquiring WNNJ (FM) in August 1996, we changed the station's format from hot adult contemporary to classic hits and increased the signal power to 25,000 watts. In 1999, WNNJ (FM) shared the number one market position with its sister station, WSUS (FM), in the 25-54 year old target demographic audience, with a market share of 13.8%. WSUS (FM) began operations in 1972. We acquired the station in 1997 and reprogrammed its format to adult contemporary with a focus on local news and issues. With this programming focus, the station now ranks number one in the market, based on the Spring 2000 Arbitron Market Report for listeners 12 years of age and older. WSUS (FM) also ranks first in the 25-54 year old target demographic audience. The station's signal reaches Sussex, Morris and Warren Counties in New Jersey, along with Orange County in New York and Pike County in Pennsylvania. WHCY (FM) broadcasts country music and focuses on events in the country music world. In addition, WHCY (FM) provides local news, weather and traffic reports to its listeners. Based on the Spring 2000 Arbitron Market Report, WHCY (FM) has an overall market share of 3.4% for listeners 12 years of age and older, an increase of 90.0% since we acquired the station. WHCY (FM) currently ranks eighth in the market. WNNJ (AM) programs an adult standards format, targeting listeners 50 years of age and older by featuring musical hits of the past five decades from big band classics to soft contemporary. 55 NEWBURGH-MIDDLETOWN, NEW YORK 1999 Radio Market Revenue Rank: 258
Target Audience Share Audience Rank Station Call Date Demographic in Target in Target Letters Operated Format Audience Demographic Demographic - ------------------- -------- --------------- ------------------- -------------- ------------- WTSX(FM)........... 8/98 Oldies 35-64 N/A N/A WDLC(AM)........... 8/98 Adult standards 50+ N/A N/A
Market Overview The Newburgh-Middletown market ranks 258th in the United States based on 1999 radio market revenue. Radio market revenues in Newburgh-Middletown did not change from 1993 to 1998. However, radio market revenue grew 9.8% during the year ended December 31, 1999, as compared to the prior year. Newburgh-Middletown Stations We currently operate two radio stations pursuant to a local marketing agreement, in what Arbitron designates as the Newburgh-Middletown market. We do not subscribe to Arbitron in respect of this market due to signal limitations of our stations. In August 1998, we entered into a local marketing agreement for the stations to increase our listener base in Sussex, Pike, Sullivan and Orange counties which are not reflected in the Newburgh-Middletown market. Therefore, we believe the ratings for this market are not meaningful. Under the local marketing agreement with Port Jervis Broadcasting Co. Inc., we have access to the broadcasting transmission facilities of each of WDLC (AM) and WTSX (FM) for a minimum of 158 hours a week, in return for the minimum monthly payment of $20,000 which will rise to $25,000 a month from August 1, 2000. The fee for any month increases to 20% of the stations' monthly net revenues if that percentage exceeds the minimum payment. In addition, we also agree to reimburse Port Jervis Broadcasting for all of its operating and maintenance expenses, including salaries, taxes, insurance and related costs for all personnel used in the production of our programming. We have agreed to indemnify Port Jervis Broadcasting against any liability it may incur as a result of the broadcast of programs we furnish. This local marketing agreement will expire upon the earlier of the date on which we complete our acquisition of these stations and August 7, 2001. It may be terminated prior to its expiration upon any of the specified events of default or upon the order of a government authority. WTSX (FM) changed to an oldies format after we began operating the station in August 1998. As part of our branding strategy to increase listener recognition, we branded WTSX (FM) as "Fox 96.7." This brand consists of a carefully designed play list of the most popular songs from the 1960s, promotions, specialty weekends, local personalities, and an emphasis on local news and community information. WDLC (AM) changed to an adult standards format after we began operating the station and targets listeners of 50 years of age and older. Its format features musical hits of the past five decades from big classics to soft contemporary and provides news and information for the local community. WILKES BARRE-SCRANTON, PENNSYLVANIA 1999 Radio Market Revenue Rank: 77
Audience Share Audience Rank Station Call Date Target in Target in Target Letters Operated Format Demographic Audience Demographic(1) Demographic(1) - -------------- -------- ---------------------- -------------------- -------------- -------------- WSBG(FM)...... 3/95 Hot adult contemporary 18-34 Women 15.5% 1 WVPO(AM)...... 3/95 Adult standards 50+ N/A N/A WILT(AM)...... 11/99 ESPN sports 25-54 Men N/A N/A
- -------- (1) Monroe County only. 56 Market Overview Wilkes Barre-Scranton is the 77th largest radio market in the United States based on 1999 radio market revenue. Radio market revenues in the Wilkes Barre-Scranton market have grown from approximately $17.4 million in 1993 to approximately $26.5 million in 1999, representing a compound average annual revenue growth rate of 7.3%. Radio market revenue grew 11.3% during the year ended December 31, 1999, as compared to the prior year. Although our stations are listed in the greater Wilkes Barre-Scranton market, due to the mountainous terrain, our stations primarily serve Monroe County, which is a part of the Wilkes Barre-Scranton market, and do not compete in the remainder of the market. Wilkes Barre-Scranton Stations We own WILT (AM) in Mount Pocono and operate WSBG (FM) and WVPO (AM) under a local marketing agreement dated November 12, 1998 with Multicultural Radio Broadcasting, Inc., the owner of the stations. Under the local marketing agreement with Multicultural Radio Broadcasting, Inc. referred to above, we have access to the broadcasting transmission facilities of each of WSBG (FM) and WVPO (AM), including their respective subcarriers, for a minimum of 158 hours a week, in return for the payment of $175,000 quarterly fees in advance and all operating and some maintenance expenses, including salaries, taxes, insurance and related costs for all personnel used in the production of our programming. We have agreed to indemnify Multicultural Radio against any liability it may incur as a result of the broadcast of programs we furnish. This local marketing agreement will expire in November, 2001, unless we or Multicultural Radio terminate the agreement prior to its expiration. We may mutually agree with Multicultural Radio to extend the term for an additional two years. This agreement is terminable prior to its expiration upon any of the specified events of default or upon the order of a government authority. WSBG (FM) is currently ranked as Monroe County's number one radio station, with a hot adult contemporary format. WSBG (FM) shares group promotions, imaging and content with its sister station, WJLK (FM), "The POINT". We emphasize the station's commitment to the community and raise brand awareness through a variety of charity and promotional events. WVPO (AM) targets potential listeners 50 years of age and older. Its adult standard format features musical hits of the past five decades from big band classics to soft contemporary. In 1999, the Associated Press and Pennsylvania Broadcasters Association recognized WVPO (AM) for its outstanding news and public service. WILT (AM), a recently acquired station which started programming in March 2000, broadcasts the ESPN sports format for the area. ALLENTOWN, PENNSYLVANIA 1999 Radio Market Revenue Rank: 76
Target Audience Share Audience Rank Station Date Demographic in Target in Target Call Letters Acquired Format Audience Demographic Demographic - ------------------- -------- ---------------- ------------------- -------------- ------------- WODE(FM)........... pending Oldies 35-64 Women 14.8% 2 WEEX(AM)........... pending News/talk/sports 25-54 N/A N/A
Market Overview Allentown is the 76th largest radio market in the United States based on 1999 radio market revenue. Radio market revenues in the Allentown market have grown from approximately $17.4 million in 1993 to approximately $26.7 million in 1998, representing a compound average annual revenue growth rate of 7.4%. Radio market revenue grew 6.8% during the year ended December 31, 1999, as compared to the prior year. 57 Allentown Stations Upon receiving final approval from the FCC, we will purchase two radio stations in Allentown for $30.0 million from Clear Channel, further strengthening our northwestern cluster. WODE (FM) broadcasts heritage oldies and consistently ranks in the top five stations in the market for the demographic audience 12 years of age and older. WODE (FM) utilizes a carefully designed play list of Allentown's most popular songs from the 1960s, offers promotions, and emphasizes a strong community commitment by providing local content, traffic and weather. We intend to improve the programming to further maximize market opportunities. WEEX (AM) currently programs a news/talk/sports format. We intend to review the programming on the station and seek to make improvements. TRENTON, NEW JERSEY 1999 Radio Market Revenue Rank: 100
Audience Share Audience Rank Station Call Date Target in Target in Target Letters Operated Format Demographic Audience Demographic Demographic - ------------------- -------- ---------------------- -------------------- -------------- ------------- WPST (FM).......... 12/86 Contemporary hit radio 18-34 13.1% 1 WNJO (FM).......... 5/97 Oldies 35-64 9.0% 1 WHWH (AM).......... 12/86 Financial news 25-54 -- N/A WJHR (AM) (1)...... 2/99 Financial news 25-54 -- N/A WTTM (AM).......... 5/99 ESPN sports 18-54 -- N/A WCHR (AM).......... 5/97 Religion N/A N/A
- -------- (1) WJHR (AM) is licensed to Flemington, NJ Market Overview Trenton is the 100th largest radio market in the United States based on 1999 radio market revenue. Radio market revenues in the Trenton market have grown from approximately $9.5 million in 1993 to approximately $18.8 million in 1999, representing a compound average annual revenue growth rate of 12.0%. Radio market revenue grew 14.6% during the year ended December 31, 1999, as compared to the prior year. Trenton Stations We own the radio stations WHWH (AM), WTTM (AM) and WPST (FM) in the Trenton market. We currently operate three additional radio stations, WCHR (AM), WNJO (FM) and WJHR (AM), under local marketing agreements. We expect to close our acquisition of WCHR (AM) and WNJO (FM) upon receiving final approval from the FCC for the transfer of these licenses. We have paid or escrowed all of the purchase price for the stations. We expect to file for the transfer of the license of WJHR (AM) after the completion of this offering. We have entered into a local marketing agreement with Multicultural Radio Broadcasting, Inc. dated January 21, 1999, pursuant to which we have access to the broadcasting transmission facilities of WJHR (AM), including its subcarrier, for a minimum of 158 hours a week. In return, we have agreed to pay Multicultural Radio of the station a yearly fee of $200,000, payable quarterly in advance, and to reimburse Multicultural Radio for all operating and maintenance expenses, including the salaries, taxes, insurance and related costs for all personnel used in the production of our programming. We are responsible for the artistic material to be used in the programming. We have agreed to indemnify Multicultural Radio for any liability arising from the broadcasting of our programs. This local marketing agreement will expire on November 16, 2001 unless terminated earlier. This agreement is terminable upon any of the specified events of default or upon the order of a government authority. 58 In addition, we have entered into a local marketing agreement with Great Scott Broadcasting, Ltd. dated June 1, 1997, as amended on November 25, 1998, pursuant to which we have access to the broadcasting transmission facilities of WNJO (FM) and WCHR (AM) for a minimum of 158 hours a week. In return, we have agreed to reimburse Great Scott for all of its operating expenses. We must furnish artistic material and personnel for the programs and pay the salaries, taxes, insurance and related costs for all personnel used in the production of our programming. We have agreed to indemnify Great Scott for any liability resulting from the broadcast of programs we furnish. This local marketing agreement will expire on the earlier of (a) the agreement's early termination; (b) January 31, 1999, in specified circumstances; or (c) the day after the date on which we obtain initial FCC approval for the transfer of the licenses to us pursuant to the acquisition agreement which we have entered into with the owner. The agreement is terminable upon any of the specified events of default or upon the order of a government authority, or, if the FCC rejects our purchase of the stations, upon the sale of the stations to a third party or three years from the date of the expiration of lawful appeals of the FCC's decision. WPST (FM) broadcasts a contemporary hit radio format. We believe it is the market's most popular station. Its Class B FM 50,000-watt signal covers Central New Jersey and Philadelphia. WPST (FM) is programmed as a mass appeal pop culture radio station, playing today's hit music, offering promotions, featuring interesting on-air personalities, and focusing on local issues. WPST (FM) and its programming team have won numerous industry awards from Billboard, Gavin, The Friday Morning Quarterback and Bobby Poe. WPST (FM) has also been named "Best Radio Station in Philadelphia" by Philadelphia magazine. Based on the Spring 2000 Arbitron Market Report, WPST (FM) had an audience share of 13.1% for its target demographic audience, the largest in the Trenton market. Although WPST (FM) targets the 18-34 year old demographic audience, the station ranks number one in every demographic audience from 12-54 years old. WNJO (FM) is an oldies radio station. The station programmed a religious format before we began operating the station in May 1997 and moved the religious format to WCHR (AM). With the addition of this signal, we have two Class B 50,000-watt FM stations in the Trenton market and also a strong FM presence in the Philadelphia metropolitan market. The WNJO (FM) brand consists of a play list of the most popular songs from the 1960s, promotions, specialty weekends and local personalities. In 1999, the station had an audience share of 9.0% in the 35-64 year old target demographic audience, the largest in the Trenton market. Before we began operating the station, it had a 0.5% market share of this demographic audience. WHWH (AM), Trenton's financial news station, provides live news covering Wall Street to Main Street, the Associated Press, Bloomberg News and business talk 24 hours a day. The station broadcasts its 5,000 watt signal to listeners in Central New Jersey and Bucks County, Pennsylvania. In January 2000, we expanded the coverage of its format to include WJHR (AM) in Hunterdon County, New Jersey. WJHR (AM) changed its format to financial news in January 2000. Except for local news and traffic, the station builds off the format of WHWH (AM). WTTM (AM) is a 24-hour sports and sports talk station. We launched the station in May 1999 and was strategically designed to coincide with the market's increased interest in sports, including minor league ice hockey and baseball, which resulted from the introduction of new sports facilities in the area. We believed this interest was not being addressed in the market and used this opportunity to target sports fans. In addition, the station is the market's exclusive radio broadcaster of ESPN. The station features some of America's most popular sports personalities, inside information and breaking news in the world of sports. The station also focuses on local New Jersey sports teams. WTTM (AM) is the only signal that offers the market total sports content in the morning. WCHR (AM) is Trenton's religious and inspirational talk station. The station provides syndicated programming featuring introspective talk and inspirational music. 59 MONMOUTH-OCEAN, NEW JERSEY 1999 Radio Market Revenue Rank: 83
Audience Share Audience Rank Station Call Date Target in Target in Target Letters Operated Format Demographic Audience Demographic Demographic - ------------------- -------- ---------------------- -------------------- -------------- ------------- WBBO (FM).......... 5/96 Contemporary hit radio 18-34Women 6.0% 5 WJLK (FM).......... 5/96 Hot adult contemporary 25-54Women 7.7% 1 WOBM (FM).......... 7/96 Adult contemporary 35-64Women 7.7% 2 WCHR (FM) (1)...... TBD TBD TBD N/A N/A WADB (AM).......... 5/96 Adult standards/news 55+ 3.9% 9 WOBM (AM).......... 7/96 Adult standards/news 55+ 11.3% 1
- -------- (1) We are acquiring Manahawkin Communications Corporation, the owner of a construction permit to build this station. Market Overview Monmouth-Ocean is the 83rd largest radio market in the United States based on 1999 radio market revenue. Radio market revenues in the Monmouth-Ocean market have grown from approximately $13.5 million in 1993 to approximately $21.6 million in 1999, representing a compound average annual revenue growth rate of 8.1%. Radio market revenue grew 21.3% during the year ended December 31, 1999, as compared to the prior year. Monmouth-Ocean Stations We own and operate the radio stations WBBO (FM), WJLK (FM) and WADB (AM) in the Monmouth-Ocean market. Additionally, we currently operate two Monmouth- Ocean radio stations, WOBM (AM) and WOBM (FM), under a local marketing agreement with North Shore Broadcasting Corporation and Seashore Broadcasting Corporation respectively, the owners of the stations. We have entered into an agreement to purchase these two stations, which is subject to final approval from the FCC. Pursuant to the local marketing agreement referred to above, North Shore Broadcasting and Seashore Broadcasting have agreed to make available to us, for a minimum of 158 hours a week, the broadcasting transmission facilities of WOBM (FM) and WOBM (AM). In return, we agree to reimburse North Shore Broadcasting and Seashore Broadcasting for all operating expenses, to furnish artistic material and personnel for the programs and to employ and be responsible for the salaries, taxes, insurance and related costs for all personnel used in the production of our programming. We have agreed to indemnify North Shore Broadcasting and Seashore Broadcasting against any liability resulting from the broadcast of programs we furnish. This local marketing agreement expires on July 1, 2000, unless terminated earlier. The agreement is terminable upon any of the specified events of default or upon the order of a government authority. WBBO (FM) was acquired with WJLK (FM) and WADB (AM) in November 1996. The station was originally a simulcast of WJLK (FM). We relaunched the station in May 1997 with a contemporary hit radio format in the Jersey Shore market. Based on the Spring 2000 Arbitron Market Report, the station had 6.0% of the Monmouth-Ocean market, ranking fifth in the 18-34 year old women target demographic audience. WJLK (FM) is a hot adult contemporary station. We have operated the station since May 1996 and have developed a new programming strategy and brand. We designed "The POINT" as a new style of hot adult contemporary for the 25-54 year old demographic audience. Based on the Spring 2000 Arbitron Market Report, The POINT had an audience share of 7.7% in its target demographic audience of women 25-54 years old, ranking first among all local and New York stations in the Monmouth-Ocean market. 60 WOBM (FM) plays adult contemporary music and offers local news. The station has a strong community commitment. WOBM (FM)'s signal covers the Ocean County portion of the Monmouth-Ocean market. We repositioned the station to a "soft rock" concept which we believe has resulted in a more focused product and stronger brand image. Based on the Spring 2000 Arbitron Market Report, WOBM (FM) had an audience share of 7.0% in its target demographic audience of women 25-54 years old, ranking second among all local and New York stations in the Monmouth-Ocean market. WCHR (FM). Upon receiving final approval from the FCC of our purchase of Manahawkin Communications Corporation, the owner of the construction permit, currently constructing the radio station, we will commence operations and receive a license from the FCC. WCHR (FM) will have the largest signal covering the Monmouth-Ocean market. WADB (AM) targets listeners of 50 years of age and older with its adult standards format, broadcasting musical hits of the past five decades from big band hits to soft contemporary classics. WOBM (AM), known as "Wonderful Memories," broadcasts an adult standards format, targeting listeners 50 years of age and older in Ocean County, New Jersey. The station also focuses heavily on local information and news. We believe that this format will continue to be successful in Ocean County, in which approximately one-third of the population is over 55 years of age. Competition; Changes in the Broadcasting Industry Overview. The radio broadcasting industry is highly competitive. The success of each of our stations depends largely upon its audience ratings and its share of the overall advertising revenue within its market. Our stations compete for listeners and advertising revenue directly with other radio stations within their respective markets. Radio stations compete for listeners primarily on the basis of program content that appeals to a particular demographic group. By building a strong listener base consisting of specific demographic groups in each of our markets, we are able to attract advertisers seeking to reach those listeners. Some of the factors that are important to a radio station's competitive position include: . management experience; . the station's local audience rank in its market; . transmitter power; . assigned frequency; . audience characteristics; . local program acceptance; and . the number and characteristics of other radio stations and other advertising media in the market area. In addition, we attempt to improve our competitive position with promotional campaigns aimed at the demographic groups targeted by our stations and by sales efforts designed to attract advertisers. Main competitors. Our stations compete for audiences and advertising revenues within their respective markets directly with other radio stations, as well as with other media such as newspapers, magazines, network and cable television, outdoor advertising and direct mail. In addition, the radio broadcasting industry is subject to competition from new media technologies that are being developed or introduced such as: . cable television operators have introduced a service commonly referred to as "cable radio" which provides cable television subscribers with several high-quality channels of music, news and other information; 61 . direct satellite broadcast television companies are supplying subscribers with several high quality music channels; . the Internet offers new and diverse forms of program distribution; . satellite digital audio radio technology, initially developed for automotive applications, could result in new high quality satellite radio services; and . the introduction of in-band on-channel digital radio and new low- power FM radio could provide radio services in the same bandwidth currently occupied by traditional FM and AM radio services. The FCC has adopted rules for the establishment of low-powered FM stations that are designed to serve small localized areas. The radio broadcasting industry historically has grown despite the introduction of new technologies for the delivery of entertainment and information, such as, television broadcasting, cable television, audio tapes and compact discs. A growing population and greater availability of radios, particularly car and portable radios, have contributed to this growth. We cannot assure you, however, that this historical growth will continue or that the development or introduction in the future of any new media technology or low-powered FM stations will not have an adverse effect on the radio broadcasting industry. The FCC has adopted licensing and operating rules for satellite delivered audio and awarded two licenses for this service in April 1997. Satellite delivered audio may provide a medium for the delivery by satellite or terrestrial means of multiple new audio programming formats to local and/or national audiences. Digital technology also may be used in the future by terrestrial radio broadcast stations either on existing or alternate broadcasting frequencies, and the FCC has stated that it will consider making changes to its rules to permit AM and FM radio stations to offer digital sound following industry analysis of technical standards. In addition, the FCC has authorized an additional 100 kHz of bandwidth for the AM band and has allotted frequencies in this new band to certain existing AM station licensees that applied for migration to the expanded AM band. The FCC will require the licensees to return either the license for their existing AM band station or the license for the expanded AM band station at the end of a transition period. We cannot predict what other matters might be considered in the future by the FCC, nor can we assess in advance what impact, if any, the implementation of any of these proposals or changes might have on our business. On-air talent. We employ a number of on-air personalities and generally enter into employment agreements with these personalities to protect our interests in those relationships. If we lose some of these personalities, we could suffer a short-term loss of audience share, but we do not believe that the loss would have a material adverse effect on our business. Federal Regulation of Radio Broadcasting The radio broadcasting industry is subject to extensive and changing regulation of, among other things, program content, advertising content, technical operations and business and employment practices. The ownership, operation and sale of radio stations are subject to the jurisdiction of the FCC. Among other things, the FCC: . assigns frequency bands for broadcasting; . determines the particular frequencies, locations and operating power of stations; . issues, renews, revokes and modifies station licenses; . determines whether to approve changes in ownership or control of station licenses; . regulates equipment used by stations; and 62 . adopts and implements regulations and policies that directly affect the ownership, operation and employment practices of stations. The FCC has the power to impose penalties for violations of its rules or the Communications Act, including the imposition of monetary forfeitures, the issuance of short-term licenses, the imposition of a condition on the renewal of a license, nonrenewal of licences and the revocation of operating authority. The following is a brief summary of some provisions of the Communications Act and of specific FCC regulations and policies. The summary is not a comprehensive listing of all of the regulations and policies affecting radio stations. For further information concerning the nature and extent of federal regulation of radio stations, you should refer to the Communications Act, FCC rules and regulations and FCC public notices and rulings. FCC Licenses. Radio stations operate pursuant to renewable broadcasting licenses that are ordinarily granted by the FCC for maximum terms of eight years. A station may continue to operate beyond the expiration date of its license if a timely filed license renewal application is pending. During the periods when renewal applications are pending, interested parties, including members of the public, can file petitions to deny license renewals. The FCC must hold hearings on a station's renewal application if a substantial or material question of fact exists as to whether the station has served the public interest, convenience and necessity. If, as a result of an evidentiary hearing, the FCC determines that the licensee has failed to meet certain requirements and that no mitigating factors justify the imposition of a lesser sanction, then the FCC may deny a license renewal application. Only after a license renewal application is denied will the FCC accept and consider competing applications for the vacant frequency. Historically, the FCC has generally renewed licenses. We have no reason to believe that our licenses will not be renewed in the ordinary course, although we cannot assure you that any or all of our licenses will be renewed. The non-renewal of one or more of our licenses could have a material adverse effect on our business. The FCC classifies each AM and FM station. An AM station operates on either a clear channel, regional channel or local channel. A clear channel is one on which AM stations are assigned to serve wide areas. Clear channel AM stations include: Class A stations, which operate on an unlimited time basis and are designated to render primary and secondary service over an extended area; Class B stations, which operate on an unlimited time basis and are designed to render service only over a primary service area; or Class D stations, which operate either during daytime hours only, during limited times only or on an unlimited time basis with low night-time power. A regional channel is one on which Class B and Class D AM stations may operate and serve primarily a principal center of population and the rural areas contiguous to it. A local channel is one on which AM stations operate on an unlimited time basis and serve primarily a community and the immediately contiguous suburban and rural areas. Class C AM stations operate on a local channel and are designed to render service only over a primary service area that may be reduced as a consequence of interference. The class of an FM station determines the minimum and maximum facilities requirements for that station. FM class designations depend upon the geographic zone in which the transmitter of the FM station is located. In general, commercial FM stations are classified as follows, in order of increasing power and antenna height: Class A, B1, C3, B, C2, C1 and C. 63 The following table sets forth the metropolitan market served, call letters, FCC license classification, frequency, power and FCC license expiration date of each of the stations that we will own and/or operate upon the completion of all pending acquisitions. Our wholly owned subsidiary, Nassau Broadcasting II LLC, holds our licenses. Pursuant to FCC rules and regulations, many AM radio stations are licensed to operate at a reduced power during the nighttime broadcasting hours, which results in reducing the radio station's coverage during the nighttime hours of operation. Both power ratings are shown. For FM stations, the maximum effective radiated power in the main lobe is given.
Daytime Nighttime Expiration FCC Power Power Date of Market Station Class Frequency (in watts) (in watts) FCC License - ------------------------ -------- ----- ----------- ---------- ---------- ------------ Northern Westchester, NY......... WFAS (FM) A 103.9 MHz 600 600 June, 2006 WFAF (FM) A 106.3 MHz 1,400 1,400 June, 2006 WFAS (AM) C 1,230.0 kHz 1,000 1,000 June, 2006 Bridgeport, CT.......... WEBE (FM) B 107.9 MHz 50,000 50,000 April, 2006 WICC (AM) B 600.0 kHz 1,000 500 April, 2006 Danbury, CT............. WRKI (FM) B 95.1 MHz 29,500 29,500 April, 2006 WAXB (FM) A 105.5 MHz 900 900 June, 2006 WINE (AM) B 940.0 kHz 680 4 April, 2006 WPUT (AM) B 1,510.0 kHz 1,000 1,000 June, 2006 Northwestern Sussex, NJ.............. WNNJ (FM) B1 103.7 MHz 2,300 2,300 June, 2006 WSUS (FM) A 102.3 MHz 590 590 June, 2006 WHCY (FM) A 106.3 MHz 430 430 June, 2006 WNNJ (AM) B 1,360.0 kHz 2,000 2,000 June, 2006 Newburgh-Middletown, NY..................... WTSX (FM) A 96.7 MHz 890 890 June, 2006 WDLC (AM) C 1,490.0 kHz 1,000 1,000 June, 2006 Wilkes Barre-Scranton, PA..................... WSBG (FM) A 93.5 MHz 550 550 August, 2006 WVPO (AM) B 840.0 kHz 250 0 August, 2006 WILT (AM) B 960.0 kHz 1,000 24 August, 2006 Allentown, PA........... WODE (FM) B 99.9 MHz 50,000 50,000 August, 2006 WEEX (AM) C 1230.0 kHz 1,000 1,000 August, 2006 Central Trenton, NJ............. WPST (FM) B 97.5 MHz 50,000 50,000 June, 2006 WNJO (FM) B 94.5 MHz 50,000 50,000 June, 2006 WHWH (AM) B 1,350.0 kHz 5,000 5,000 June, 2006 WJHR (AM) B 1,040.0 kHz 4,700 1,000 June, 2006 WTTM (AM) B 1,680.0 kHz 10,000 1,000 (1) WCHR (AM) B 920.0 kHz 1,400 1,000 June, 2006 Shore Monmouth-Ocean, NJ...... WBBO (FM) A 98.5 MHz 6,000 6,000 June, 2006 WJLK (FM) A 94.3 MHz 1,300 1,300 June, 2006 WOBM (FM) A 92.7 MHz 1,400 1,400 June, 2006 WCHR (FM) B 105.7 MHz 25,000 25,000 N/A WADB (AM) B 1,310.0 kHz 2,500 1,000 June, 2006 WOBM (AM) B 1,160.0 kHz 5,000 8,900 June, 2006
- -------- (1) We are currently operating this station under temporary authority from the FCC. We are awaiting the issuance of a formal license, which will expire five years after the date of issuance. 64 Transfer or Assignment of License. The Communications Act prohibits the assignment of broadcast licenses or the transfer of control of a broadcast licensee without the prior approval of the FCC. In determining whether to grant such approval, the FCC considers a number of factors pertaining to the licensee and proposed licensee, including: . compliance with the various rules limiting common ownership of media properties in a given market; . the character of the licensee and those persons holding attributable interests in the licensee; and . history of compliance with the Communications Act's limitations on alien ownership as well as compliance with other FCC regulations and policies. To obtain FCC consent to assign or transfer control of a broadcast license, the licensee and the proposed licensee must jointly file appropriate applications with the FCC. If the application involves a substantial change in ownership or control, for example, the transfer or acquisition of more than 50.0% of the voting stock, the FCC places the application on public notice for not less than 30 days during which time interested parties, including members of the public, may file petitions to deny or other objections against the application. If the FCC grants an assignment or transfer application, interested parties have 30 days from public notice of the grant to seek reconsideration of that grant. The FCC usually has an additional ten days to set aside the grant on its own motion. If the application does not involve a substantial change in ownership or control, it is a pro forma application, which is not subject to the public notice and 30-day petition to deny procedure. Interested parties may file informal objections against the pro forma application at any time until the FCC acts on the application. When ruling on an assignment or transfer application, the FCC may not consider whether the public interest might be served by an assignment or transfer of control of the broadcast license to any party other than the assignee or transferee specified in the application. Multiple Ownership Rules. The Communications Act and FCC rules impose specific limits on the number of commercial radio stations an entity can own in a single market. These rules may preclude us from acquiring certain stations we might otherwise seek to acquire. The rules also effectively prevent us from selling stations in a market to a buyer that has reached its ownership limit in the market unless that buyer divests other stations. The local radio ownership rules are as follows: . in markets with 45 or more commercial radio stations, an entity may own, operate or control up to eight commercial stations, no more than five of which can be either AM or FM; . in markets with 30 to 44 commercial radio stations, an entity may own, operate or control up to seven commercial stations, no more than four of which can be either AM or FM; . in markets with 15 to 29 commercial radio stations, an entity may own, operate or control up to six commercial stations, no more than four of which can be either AM or FM; and . in markets with 14 or fewer commercial radio stations, an entity may own, operate or control up to five commercial stations or no more than 50.0% of the market's total, whichever is lower, and no more than three of which can be either AM or FM. Currently, FCC rules define a radio market in terms of the overlapping signal contours of the commonly owned stations in question. Specifically, the FCC looks to all stations that will be commonly owned after a proposed transaction is consummated and then groups those stations into "markets" based on whether the stations have overlapping signal contours. After defining the market, the FCC then determines the total number of stations in that market by adding all commercial radio stations whose signal contours overlap the contour of any one or more of the stations used to define the market. The FCC, however, recently has expressed concerns about its administration of the radio multiple ownership rules, in particular its method of defining radio markets, counting the number of stations within a particular market, and determining the number of stations owned by an entity in a market. As a result, the FCC has announced its intention to commence a 65 rulemaking proceeding to address whether market definitions used by Arbitron for ratings purposes would be a more accurate measure of radio markets. Because the FCC has not yet commenced this rulemaking proceeding, we cannot predict whether any change in how the FCC defines radio markets for purposes of the multiple ownership rules would affect our ability to acquire additional stations on a market-by-market basis. The FCC is also reportedly considering proposing a policy that would give special review to a proposed transaction if it would enable a single owner to attain a high degree of revenue concentration in a market. In connection with this, the FCC, in its public notices, has invited comment on the impact of concentration of media voices in proposed transactions, and has delayed or refused its consent in some cases because of revenue concentration. The FCC recently revised its radio/television cross-ownership rule to allow for greater common ownership of television and radio stations. The revised radio/television cross-ownership rule permits a single owner to own up to two television stations, consistent with the FCC's rules on common ownership of television stations, together with one radio station in all markets. In addition, an owner will be permitted to own additional radio stations, not to exceed the local ownership limits for the market, as follows: . in markets where 20 media voices will remain, an owner may own an additional five radio stations, or, if the owner only has one television station, an additional six radio stations; and . in markets where 10 media voices will remain, an owner may own an additional three radio stations. A "media voice" includes each independently owned, full-power television and radio station and each daily newspaper that has a circulation exceeding 5.0% of the households in the market, plus one voice for all cable television systems operating in the market. In addition to the limits on the number of radio stations and radio television combinations that a single owner may own, the FCC's broadcast/newspaper cross-ownership rule prohibits the same owner from owning a broadcast station and a daily newspaper in the same geographic market. The FCC recently announced its intention to commence a rulemaking proceeding to liberalize the broadcast/newspaper cross-ownership rule because the efficiencies of combined newspaper/broadcast operation might produce more public affairs or news programming. The FCC generally applies its ownership limits to attributable interests held by an individual, corporation, partnership or other association. In the case of corporations controlling broadcast licenses, the interests of officers, directors and those who, directly or indirectly, have the right to vote 5% or more of the corporation's voting stock are generally attributable. In addition, passive investors are attributable if they hold 20.0% or more of the corporation's voting stock. If a single individual or entity controls more than 50.0% of a corporation's voting stock, however, the interests of other stockholders are generally not attributable unless the stockholders are also officers or directors of the corporation. The FCC treats all partnership interests as attributable, except for those limited partnership interests that under FCC policies are "insulated" from "material involvement" in the management or operation of the media related activities of the partnership. The FCC currently treats limited liability companies like limited partnerships for purposes of attribution. The FCC recently adopted a new rule, known as the equity-debt-plus rule, that causes certain creditors or investors to be attributable owners of a station, regardless of whether there is a single majority stockholder. Under this new rule, a major programming supplier or a same-market owner will be an attributable owner of a station if the supplier or owner holds debt or equity, or both, in the station that is greater than 33.0% of the value of the station's total debt plus equity. A major programming supplier includes any programming supplier that provides more than 15.0% of the station's weekly programming hours. A same-market owner includes any attributable owner of a media company, including broadcast stations, cable television and newspapers, located in the same market as the station, but only if the owner is attributable under an FCC attribution rule other than 66 the equity-debt-plus rule. If attribution under the new equity-debt-plus rule results in a violation of the FCC's multiple ownership rules, each affected party must come into compliance with those rules, by reducing or eliminating the party's interest in the affected media outlets or obtaining a waiver from the FCC, no later than August 5, 2000. The attribution rules limit the number of radio stations we may acquire or own in any market. Alien Ownership Rules. The Communications Act prohibits the issuance or holding of broadcast licenses by persons who are not U.S. citizens, whom the FCC rules refer to as "aliens," including any corporation if more than 20.0% of its capital stock is owned or voted by aliens. In addition, the FCC may prohibit any corporation from holding a broadcast license if the corporation is controlled by any other corporation of which more than 25.0% of the capital stock is owned of record or voted by aliens, if the FCC finds that the prohibition is in the public interest. Our certificate of incorporation prohibits the ownership, voting and transfer of our capital stock in violation of the FCC restrictions, and prohibits the issuance of capital stock or the voting rights such capital stock represents to or for the account of aliens or corporations otherwise subject to domination or control by aliens in excess of the FCC limits. The certificate of incorporation authorizes our board of directors to enforce these prohibitions. For example, the certificate of incorporation provides for the redemption of shares of our capital stock by action of the board of directors to the extent necessary to comply with these alien ownership restrictions. Local Marketing Agreements. Over the past few years, a number of radio stations have entered into what have commonly been referred to as local marketing agreements. While these agreements may take varying forms, under a typical local marketing agreement, separately owned and licensed radio stations agree to enter into cooperative arrangements of varying sorts, subject to compliance with the requirements of antitrust laws and with FCC's rules and regulations. Under these arrangements, separately owned stations could agree to function cooperatively in programming, advertising sales and similar matters, subject to the requirement that the licensee of each station maintain independent control over the programming and operations of its own station. One typical type of local marketing agreement is a programming agreement between two separately-owned radio stations serving a common service area, whereby the licensee of one station provides substantial portions of the broadcast programming for airing on the other licensee's station, subject to ultimate editorial and other controls being exercised by the latter licensee, and sells advertising time during those program segments. The FCC's rules provide that a radio station that brokers more than 15.0% of the weekly broadcast time on another station serving the same market will have an attributable ownership interest in the brokered station for purposes of FCC's local radio ownership limits. As a result, in a market where we own a radio station, we cannot enter into a local marketing agreement with another radio station in the same market if we could not own the brokered station under the multiple ownership rules, unless our programming on the brokered station constituted 15.0% or less of the brokered station's programming time on a weekly basis. FCC rules also prohibit a broadcast station from duplicating more than 25.0% of its programming on another station in the same broadcast service, that is AM-AM or FM-FM, through a local marketing agreement where the brokered and brokering stations which it owns or programs serve substantially the same area. Programming and Operations. The Communications Act requires broadcasters to serve the public interest. The FCC gradually has relaxed or eliminated many of the more formalized procedures it had developed in the past to promote the broadcast of certain types of programming responsive to the needs of a station's community of license. The FCC, however, still requires a broadcast licensee to present programming that is responsive to community problems, needs and interests and to maintain records demonstrating this responsiveness. The FCC often will consider complaints from listeners concerning a station's programming when it evaluates renewal applications of a licensee, but listeners may file complaints against a station at any time. Station licensees must maintain copies of listener complaints in the station's public file. Stations also must pay regulatory and application fees and follow various rules promulgated under the Communications Act. Those rules regulate, among other things, political advertising, sponsorship identifications, the advertisement of contests and lotteries, obscene and indecent broadcasts and technical operations, including limits on human exposure to radio frequency radiation. 67 In January 2000, the FCC adopted new rules prohibiting employment discrimination by broadcast stations on the basis of race, religion, color, national origin and gender; and requiring broadcasters to implement programs to promote equal employment opportunities at their stations. The rules generally require broadcast stations to disseminate information about job openings widely so that all qualified applicants, including minorities and women, have an adequate opportunity to compete for the job. Broadcasters may fulfill this requirement by sending the station's job vacancy information to organizations that request it, participating in community outreach programs or designing an alternative recruitment program. Broadcasters with five or more full-time employees must place in their public files annually a report detailing their recruitment efforts and must file a statement with the FCC certifying compliance with the rules every two years. Broadcasters with ten or more full- time employees must file their annual reports with the FCC midway through their license term. Broadcasters also must file employment information with the FCC annually for statistical purposes. These new equal employment opportunity rules replace the FCC's prior rules, some of which were ruled unconstitutional by the U.S. Court of Appeals for the District of Columbia Circuit. Proposed and Recent Changes. Congress and the FCC may in the future consider and adopt new laws, regulations and policies regarding a wide variety of matters that could affect, directly or indirectly, the operation, ownership and profitability of our radio stations, including the loss of audience share and advertising revenues for our radio stations, and an inability to acquire additional radio stations or to finance those acquisitions. These matters may include: . changes in the FCC's cross-interest, multiple ownership and attribution policies; . regulatory fees, spectrum use fees or other fees on FCC licenses; . foreign ownership of broadcast licenses; . restatement in revised form of the FCC's equal employment opportunity rules and revisions to the FCC's rules relating to political broadcasting; . technical and frequency allocation matters; and . proposals to restrict or prohibit the advertising of beer, wine and other alcoholic beverages on radio. The FCC currently is considering standards for evaluating, authorizing, and implementing terrestrial digital audio broadcasting technology, including in-band on-channel technology for FM radio stations. Digital audio broadcasting's advantages over traditional analog broadcasting technology include improved sound quality and the ability to offer a greater variety of auxiliary services. In-band on-channel technology would permit an FM station to transmit radio programming in both analog and digital formats, or in digital only formats, using the bandwidth that the radio station is currently licensed to use. It is unclear what regulations the FCC will adopt regarding digital audio broadcasting or in-band on-channel technology and what effect such regulations would have on our business or the operations of our radio stations. In January 2000, the FCC voted to adopt rules creating a new low-power FM radio service. The new low-power stations will operate at a maximum power of between 10 and 100 watts in the existing FM commercial and noncommercial band. Low-power stations may be used by governmental and nonprofit organizations to provide noncommercial educational programming or public safety and transportation radio services. No existing broadcaster or other media entity, including us, can have an ownership interest or enter into any program or operating agreement with any low-power FM station. During the first two years of the new service, applicants must be based in the area that they propose to serve. FCC rules do not permit applicants to own more than one station nationwide during the initial two-year period. After the initial two-year period, the rules permit entities to own up to five stations nationwide, and after three years, the limit will increase to ten stations nationwide. A single person or entity may not own two low-power stations whose transmitters are less than seven miles from each other. The authorizations for the new stations will not be transferable. The FCC 68 recently closed on June 8, 2000 the first filing window for applications for new low-power FM radio stations in Alaska, California, Washington, D.C., Georgia, Indiana, Louisiana, Maine, Mariana Islands, Maryland, Oklahoma, Rhode Island and Utah. At this time, we cannot assess the competitive impact of these new stations on our business. The new low-power stations must comply with certain technical requirements aimed at protecting existing FM radio stations from interference, although we cannot be certain of the level of interference that low-power stations will cause after they begin operating. Moreover, if low- power FM stations are licensed in the markets in which we operate our stations, the low-power stations may compete for listeners and advertisers. The low-power stations may also limit our ability to obtain new licenses or to modify our existing facilities, although FCC engineers have conducted interference testing and have concluded that the new 10-watt power FM stations will not produce unacceptable levels of interference to existing FM stations, such as those owned by us. Finally, the FCC has adopted procedures for the auction of broadcast spectrum in circumstances where two or more parties have filed for new or major change applications which are mutually exclusive. These auction procedures may limit our efforts to modify or expand the broadcast signals of our stations. We cannot predict what other matters might be considered in the future by the FCC or Congress, nor can we judge in advance what impact, if any, the implementation of any of these proposals or changes might have on our business. Federal Antitrust Laws. The agencies responsible for enforcing the federal antitrust laws, the Federal Trade Commission or the Department of Justice, may investigate certain acquisitions. We cannot predict the outcome of any specific FTC or Department of Justice investigation. Any decision by the FTC or the Department of Justice to challenge a proposed acquisition could affect our ability to consummate an acquisition or to consummate it on the terms acceptable to us. For an acquisition meeting certain size thresholds, the Hart-Scott-Rodino Act requires the parties to file notification and report forms concerning antitrust issues with the FTC and the Department of Justice and to observe specified waiting period requirements before consummating the acquisition. If the investigating agency raises substantive issues in connection with a proposed transaction, then the parties frequently engage in lengthy discussions or negotiations with the investigating agency concerning possible means of addressing those issues, including restructuring the proposed acquisition or divesting assets. In addition, the investigating agency could file suit in federal court to enjoin the acquisition or to require the divestiture of assets, among other remedies. The FTC or the Department of Justice may investigate acquisitions under the antitrust laws before or after consummation that are not required to be reported under the Hart-Scott-Rodino Act. In addition, private parties may under certain circumstances bring legal actions to challenge an acquisition under the antitrust laws. As part of its increased scrutiny of radio station acquisitions, the Department of Justice has stated publicly that it believes that local marketing agreements, joint sales agreements and other similar agreements customarily entered into in connection with radio station transfers could violate the Hart- Scott-Rodino Act if such agreements take effect prior to the expiration of the waiting period under the Hart-Scott-Rodino Act. Furthermore, the Department of Justice has noted that joint sales agreements may raise antitrust concerns under Section 1 of the Sherman Act and has challenged joint sales agreements in certain locations. The Department of Justice also has stated publicly that it has established certain revenue and audience share concentration benchmarks with respect to radio station acquisitions, above which a transaction may receive additional antitrust scrutiny. However, to date, the Department of Justice has also investigated transactions that do not meet or exceed these benchmarks and has cleared transactions that do exceed these benchmarks. 69 Employees On March 31, 2000, we had a staff of 236 full-time employees and 78 part- time employees. We believe that our relations with our employees are good. Environmental As the owner, lessee or operator of various real properties and facilities, we are subject to various federal, state and local environmental laws and regulations. Historically, compliance with these laws and regulations has not had a material adverse effect on our business. We cannot assure you, however, that we will not be required to expend significant funds in the future to comply with existing or new environmental laws and regulations. Properties And Facilities We require offices, studios and transmitter and antenna sites to support each of our radio stations. We typically lease our studio and office space with lease terms that expire in six months to ten years. Our principal executive offices are located at 619 Alexander Road, Princeton, New Jersey 08540. We lease the majority of our main transmitter and antenna sites. We generally locate the transmitter and antenna site for each station so as to provide maximum market coverage, consistent with the station's FCC license. After the completion of our acquisition of Aurora Communications, we will own some additional antenna sites and studio and office space. No single facility is material to us. We believe that our facilities are generally in good condition and suitable for our operations. However, we continually look for opportunities to upgrade our facilities and may do so in the future. Substantially all of our properties and equipment serve as collateral for our obligations under our new credit facility. Seasonality We expect that our operations and revenues will be seasonal in nature, with generally lower revenue generated in the first quarter of the year and generally higher revenue generated in the fourth quarter of the year. The seasonality of our business causes, and is likely to continue to cause, a significant variation in our quarterly operating results. Legal Proceedings From time to time, we are involved in litigation incidental to the conduct of our business, but we are not currently a party to any lawsuit or proceeding. 70 MANAGEMENT Directors, executive officers and senior officers The names of our executive officers, directors and senior officers and their respective ages and positions are as follows:
Name Age Position ---- --- -------- Louis F. Mercatanti, Jr. ......... 43 President, Chief Executive Officer and Director Michael S. Libretti............... 36 Executive Vice President, Operations and Finance, Chief Financial Officer and Director Joan E. Gerberding................ 50 President of Nassau Radio Network G. Daniel Henrickson, Jr. ........ 48 Executive Vice President and General Manager Peter D. Tonks.................... 49 Executive Vice President and Director of Accounting & Human Resources Anthony A. Gervasi, Jr. .......... 32 Senior Vice President of Engineering & Technology Michelle Stankowski............... 31 Senior Vice President of Programming Donald E. Dalesio................. 38 Vice President and General Manager Reuel H. Musselman, Jr. .......... 50 Vice President and General Manager Brion B. Applegate................ 46 Director William B. Collatos............... 45 Director Stuart D. Frankel................. 53 Director
There are no family relationships between any persons identified above. The following are brief biographies of the persons identified above. Louis F. Mercatanti, Jr., our founder, is our President and Chief Executive Officer and a director and had until our reorganization held those positions at our general partner since its inception in early 1995. Mr. Mercatanti acquired all of our equity from Nassau Broadcasting Company in December 1986 and operated the stations prior to the founding of the limited partnership. In 1995, Mr. Mercatanti co-founded the partnership with Brion B. Applegate and William B. Collatos of Spectrum Equity Investors, L.P. and Stuart D. Frankel of Grotech Capital Group. Since the founding of the partnership, Mr. Mercatanti has devoted substantially all of his time to the management of the partnership. He has been responsible for formulating our annual operating budgets and managing all of our financing requirements. Mr. Mercatanti was actively involved in several other successful entrepreneurial activities prior to his founding of the partnership. Michael S. Libretti is our Executive Vice President, Operations and Finance, Chief Financial Officer and Director and had until our reorganization held those positions at our general partner since December 1997. Mr. Libretti joined our general partner in November 1996 and served as its Senior Vice President of Operations from then until December 1997. From 1986 to November 1996, Mr. Libretti worked in various capacities for AT&T Capital Corporation. During his last three years at AT&T Capital he served as a Director of the Capital Markets Division responsible for providing financing to the media industry. From 1990 to 1993, Mr. Libretti was actively involved in providing project financing for the energy industry, as well as leveraged lease financing to the aircraft industry. Prior to 1990, Mr. Libretti was involved in a variety of projects in accounting, systems, acquisition analysis, sales and budgeting. During his career with AT&T Capital, he was involved in numerous financings with an aggregate value in excess of $1.0 billion. Joan E. Gerberding has served as President of our Nassau Radio Network since March 1997. She had been Executive Vice President and Chief Operating Officer of the limited partnership from 1995 to 1997. Prior to that, she served in various management capacities with Nassau Broadcasting Company since 1981. G. Daniel Henrickson, Jr. is our Executive Vice President and General Manager and had until our reorganization held those positions at our general partner since March 1998 and March 1995, respectively. His duties include the management of our stations in the Central Region. Prior to being named Executive Vice 71 President of our general partner, he served in various management capacities with Nassau Broadcasting Company since 1995. Peter D. Tonks is our Executive Vice President and Director of Accounting & Human Resources and had until our reorganization held those positions at our general partner since March 1994. From 1980 to March 1994, he served as President and Chief Executive Officer of Tonks & Company, CPAs. Anthony A. Gervasi, Jr. is our Senior Vice President of Engineering & Technology and had until our reorganization held those positions at our general partner since December 1998. Prior to that, he had been Director of Engineering from 1995 to 1997 and Vice President of Engineering from 1997 to 1998, of our general partner. From September 1992 through October 1995, Mr. Gervasi was Director of Engineering of a radio station at Chancellor Media. Michelle Stankowski is our Senior Vice President of Programming and manages our programming division for all our stations. She had until our reorganization held various positions at our general partner since 1987. Ms. Stankowski is the Chairperson of the Programming Committee for the National Association of Broadcasters 2000 Radio Show and the Chairperson of the New Jersey Broadcasters' Association and Mid- Atlantic States Annual Convention. Donald E. Dalesio is our Vice President and Market Manager and had until our reorganization held those positions at our general partner since September 1996. Prior to that, Mr. Dalesio had been General Sales Manager of Clear Channel Communications, Inc. from May 1995 to August 1996. From 1991 through 1995, he was Vice President of Group Operations at H&D Broadcast Group. Reuel H. Musselman, Jr. is our Vice President and General Manager and had until our reorganization held those positions at our general partner since 1996. Prior to that, Mr. Musselman had been general manager of Clearview Broadcasting Company from September 1992 to October 1996. Brion B. Applegate is a director and had until our reorganization served as a director of our general partner since 1995. Mr. Applegate has been the managing general partner of Spectrum Equity Associates, L.P., since 1994. Mr. Applegate is also the Chairman and Chief Executive Officer of Applegate & Collatos, Inc., a company which provides management services to Spectrum. From 1982 through 1993, Mr. Applegate was a partner with Burr, Egan & Deleage & Co., a venture capital firm, in which he supervised the company's investments in numerous broadcasting companies. Mr. Applegate serves on the boards of directors of Network Access Solutions, Inc. and Tut Systems, Inc. William B. Collatos is a director and had until our reorganization served as a director of our general partner since 1995. Mr. Collatos is currently a managing general partner of Spectrum Equity Associates, L.P. Mr. Collatos is also the Chief Operating Officer of Applegate & Collatos, Inc., a company which provides management services to Spectrum. Mr. Collatos serves on the boards of directors of ITXC Corporation, Jazztel, PLC, Pegasus Satellite Television and Galaxy Telecom. Stuart D. Frankel is a director and had until our reorganization served as a director of our general partner since 1995. Mr. Frankel currently serves as a Managing Director and the Secretary of Grotech Capital Group IV, LLC, the general partner of Grotech Partners IV, L.P., supervising certain of Grotech's venture capital investments. Mr. Frankel has also served as a Managing Director and the Secretary of Grotech Management Company, the provider of management services to Grotech. Mr. Frankel serves as a principal for several other venture capital funds and as the general partner of several real estate partnerships. Election of Directors Our stockholders elect directors at our annual meeting of stockholders. Directors hold office until the next annual meeting of stockholders and until his or her successor is duly elected and qualified or until his or her resignation or removal, if earlier. 72 Indemnification of Directors Section 145 of the Delaware General Corporation Law allows us to indemnify officers, directors and any corporate agents under certain circumstances for liabilities, including reimbursement for expenses incurred, arising under the Securities Act. Our certificate of incorporation and our by- laws provide for indemnification of our directors, officers, employees and other agents to the extent and under the circumstances permitted by the Delaware General Corporation Law. We expect to enter into agreements with our directors and executive officers that require us, among other things, to indemnify them to the fullest extent permitted by Delaware law against certain liabilities that may arise because of their status or service as directors and executive officers. We also intend to purchase directors and officers liability insurance, which provides coverage against liabilities, including liabilities under the Securities Act. Compensation of Directors Directors who are also our employees will receive no additional compensation for service as a director. We reimburse directors for their reasonable expenses incurred in connection with attending board or committee meetings. We expect that each outside director will be granted stock options under our stock incentive plan. An outside director is a director who is not an employee of our company and who owns, together with his or her affiliates, less than 1% of our voting power. These grants are described under "--2000 Stock Incentive Plan." Committees of the Board of Directors Prior to or immediately following the consummation of this offering, we will establish an executive committee consisting of Louis F. Mercatanti, Jr., Michael S. Libretti and Brion B. Applegate. The executive committee will have the authority to approve our acquisition and divestiture of business entities for a price of up to $200.0 million, the appointment of our senior officers or those of our affiliates and termination of their employment, the preparation and approval of short-term and long-term budgets, and other material policy- level decisions. Prior to or immediately following the consummation of this offering, we will establish an audit committee of the board of directors which will consist solely of three or more independent directors unless otherwise permitted by Nasdaq rules. In addition, we will adopt an audit committee charter. The audit committee will review, act on and report to the board of directors with respect to various auditing and accounting matters, including the selection of our auditors, the scope of the annual audits, fees to be paid to the auditors, the performance of our independent auditors and our accounting practices. Prior to or immediately following the consummation of this offering, we will establish a compensation committee of the board of directors which will consist of at least two independent directors. The compensation committee will determine the salaries and incentive compensation of our officers and provide recommendations for the salaries and incentive compensation of our other employees and consultants. The compensation committee will also administer our 2000 stock incentive plan and our employee stock purchase plan. Compensation Committee Interlocks and Insider Participation During the year ended December 31, 1999, our general partner had no compensation committee. The board of directors of our general partner performed the equivalent function for 1999. Following the consummation of this offering, a newly established compensation committee of our board of directors will make compensation decisions. 73 Executive Compensation The following table sets forth, for the years ended December 31, 1999, 1998 and 1997, the compensation paid to the chief executive officer and the other four most highly paid executives in 1999, all of whom served as executive officers of our general partner and all of whom serve as executive officers of our corporation. Summary Compensation Table
Long-Term Compensation ------------ Annual Compensation Securities ----------------- Underlying All Other Name and Principal Position Year Salary Bonus Options (1) Compensation --------------------------- ---- -------- -------- ------------ ------------ Louis F. Mercatanti, Jr. .... 1999 $275,000 $150,000 -- $12,263 (2) President and Chief 1998 275,000 125,000 -- 25,299 Executive Officer 1997 275,000 188,000 -- 24,197 Michael S. Libretti.......... 1999 140,000 91,515 9,279 8,225 (3) Executive Vice President, 1998 130,000 61,000 43,304 14,460 Operations and Finance and Chief Financial Officer 1997 130,000 30,000 21,652 13,113 Joan E. Gerberding........... 1999 150,000 45,000 1,856 3,380 (4) President, Nassau Radio 1998 150,000 35,000 5,568 5,981 Network 1997 150,000 27,000 26,601 6,006 G. Daniel Henrickson, Jr. ... 1999 150,000 20,500 3,093 7,515 (5) Executive Vice President and 1998 130,000 35,000 3,093 12,773 General Manager 1997 130,000 26,000 27,838 13,101 Peter D. Tonks............... 1999 135,000 31,000 1,237 5,990 (6) Executive Vice President and 1998 130,000 6,500 3,093 16,551 Director of Accounting & Human Resources 1997 127,000 6,000 1,856 16,671
- -------- (1) See "Nassau Options" below. (2) Consists of a $2,083 matching contribution made by Nassau Broadcasting Partners, L.P. to the Nassau Broadcasting Partners, L.P. 401(k) plan and $10,180 in respect of term life and disability premiums paid by Nassau Broadcasting Partners, L.P. (3) Consists of a $2,272 matching contribution made by Nassau Broadcasting Partners, L.P. to the Nassau Broadcasting Partners, L.P. 401(k) plan and $5,953 in respect of term life and disability premiums paid by Nassau Broadcasting Partners, L.P. (4) Consists of a $1,940 matching contribution made by Nassau Broadcasting Partners, L.P. to the Nassau Broadcasting Partners, L.P. 401(k) plan and $1,440 in respect of term life and disability premiums paid by Nassau Broadcasting Partners, L.P. (5) Consists of a $2,172 matching contribution made by Nassau Broadcasting Partners, L.P. to the Nassau Broadcasting Partners, L.P. 401(k) plan and $5,343 in respect of term life and disability premiums paid by Nassau Broadcasting Partners, L.P. (6) Represents premiums paid by Nassau Broadcasting Partners, L.P. in respect of term life and disability insurance. Nassau Options One of our stockholders, Nassau Broadcasting Company, granted some of our employees options to acquire its stock at an exercise price of $0.15 per share, which we will refer to as the old Nassau options. Nassau Broadcasting Company granted these options to these employees as additional compensation for 74 services provided by these employees to Nassau Broadcasting Partners, L.P. Upon cancellation of the old Nassau options, Nassau Broadcasting Partners, L.P. granted these employees options to purchase partnership interests in it pursuant to the Nassau Broadcasting Partners, L.P. Partnership Unit Option Plan, which we will refer to as the partnership options. As part of our incorporation and reorganization in connection with this offering, we have converted the partnership options into options to purchase our shares of class A common stock, which we will refer to as the new Nassau options. We reserved the shares needed to satisfy the new Nassau options, which are available for issuance under the 2000 stock incentive plan described below. The following table sets forth, with respect to the chief executive officer of our general partner and the four other most highly compensated executive officers, information concerning the number of shares of Nassau Broadcasting Company subject to old Nassau options, the number of partnership units in Nassau Broadcasting Partners, L.P. subject to partnership options, and the number of shares of Nassau Broadcasting Corporation subject to new Nassau options:
Shares Subject to Shares Partnership Shares New Nassau Subject Units Subject Options to Old Subject to to New after Nassau Partnership Nassau Aurora Name Options Options Options acquisition ---- ------- ----------- ------- ----------- Louis F. Mercatanti, Jr................. -- -- -- -- Michael S. Libretti..................... 600,000 12,000 74,235 58,593 Joan E. Gerberding...................... 275,000 5,500 34,025 26,856 G. Daniel Henrickson, Jr................ 275,000 5,500 34,025 26,856 Peter D. Tonks.......................... 87,000 1,740 10,764 8,496
Stock and Option Ownership of Executive Officers Messrs. Libretti, Henrickson and Tonks and Ms. Gerberding together own vested options to purchase 153,049 shares of our class A common stock, which will reduce to options to purchase 120,801 shares if we complete the Aurora Communications acquisition, and Mr. Mercatanti owns 18,559 shares of our class B common stock, which will reduce to 14,648 shares of class B common stock if we complete the Aurora Communications acquisition. We will grant all of our executive officers and directors additional options to purchase shares of our class A common stock at the time of the completion of the offering. In addition, some or all of our executive officers may purchase shares of our class A common stock in the offering from the shares reserved for sale to our employees, directors, affiliates, and other individuals whom we feel have contributed to our success. Employment Agreements We have entered into employment agreements, effective July 1, 2000, with Louis F. Mercatanti, Jr., our President and Chief Executive Officer, Michael S. Libretti, our Executive Vice President, Operations and Finance and Chief Financial Officer, and Peter D. Tonks, our Executive Vice President and Director of Accounting & Human Resources. The terms of these agreements are as follows: Louis F. Mercatanti, Jr.: Mr. Mercatanti's employment agreement provides that he will be employed for three years, with automatic extensions of one year unless notice is otherwise given, as our President and Chief Executive Officer. For the first year of the term, Mr. Mercatanti's base salary will be $400,000; it will increase to $420,000 for the second year and $445,000 for the third year of his employment. Mr. Mercatanti will be paid an annual bonus of 50% of his base salary for the year if he achieves at least 90% of target performance. His annual bonus will increase to 100% of base salary if he achieves 100% of target performance. Mr. Mercatanti will be eligible for option grants under our 2000 stock incentive plan in amounts determined by the compensation committee. Those options will vest at a rate of 25% per year, provided that they will vest in 75 full upon Mr. Mercatanti's termination without cause, for death or disability or by Mr. Mercatanti for good reason, including termination by him for any reason within 90 days after a change in control, or for any reason by us within 18 months following a change in control. Mr. Mercatanti has agreed that, in the event of his termination of employment, he will not compete with our business for a period of six months. He has also agreed not to disclose at any time confidential information about us. Either party may terminate the contract upon 30 days' notice. If we terminate Mr. Mercatanti's employment without cause or within 18 months following a change in control, or if Mr. Mercatanti terminates his employment for good reason, including termination by him for any reason within 90 days after a change in control, we will pay Mr. Mercatanti 100% of his then current base salary plus the amount of his annual bonus, assuming attainment of all applicable performance goals, and we will provide benefits to Mr. Mercatanti for the remaining period of the employment term. If any payment to Mr. Mercatanti, whether pursuant to the terms of his employment agreement or otherwise, in connection with a change in control triggers the excise tax imposed under Section 4999 of the Internal Revenue Code, we will pay to him an additional amount so that, after payment of that tax and all other taxes, the net amount he retains will be that amount owing to him determined without regard to the imposition of the excise tax. Michael S. Libretti and Peter D. Tonks: We have also entered into employment agreements with Mr. Libretti and Mr. Tonks which are similar to the employment agreement with Mr. Mercatanti, with the following exceptions: . We will pay Mr. Libretti a base salary of $165,000 for the first year, $175,000 for the second year, and $190,000 for the third year of his employment. In addition to his annual bonus, which will be at least 50% of his base salary for the year if he achieves at least 90% of target performance, and increasing to 100% of his base salary if he achieves 100% of target performance, we will also pay Mr. Libretti a monthly bonus equal to 0.5% of our broadcast cash flow for each month; and . We will pay Mr. Tonks a base salary of $165,000 for the first year, $175,000 for the second year, and $190,000 for the third year of his employment after we entered into this employment agreement. We will also pay Mr. Tonks an annual bonus of 25% of his then current base salary if he achieves at least 90% of target performance, and increasing to 50% of his base salary if he achieves 100% of target performance. 2000 Stock Incentive Plan We have adopted a 2000 stock incentive plan. The purpose of this plan is to promote our long-term growth and profitability by providing key personnel with incentives to improve stockholder value and to contribute to our growth and financial success and by enabling us to attract, retain and reward the best available persons for positions of substantial responsibility. The principal terms of the plan are as follows: General. We have reserved for issuance up to 2,000,000 shares of our outstanding class A common stock, subject to equitable adjustment upon the occurrence of any stock dividend or other distribution, stock split, merger, consolidation, combination, share repurchase or exchange or similar corporate transaction or event. If an award granted under the plan expires or is terminated for any reason, the shares of class A common stock underlying the award will again be available for purposes of the plan. We may not grant any individual awards relating to more than 1,000,000 shares of the class A common stock, in any 12-month period. Types of Awards. We may grant the following awards under the plan: . stock options, including incentive and nonqualified stock options; . restricted stock; . stock bonuses; and/or . other stock based awards. 76 Administration. Our board of directors will administer the plan. In the alternative, the board of directors may appoint a committee consisting of not less than two members of the board of directors to administer the plan on behalf of the board of directors, subject to the terms and conditions as the board of directors may prescribe, and for this purpose, we refer to the body administering the plan as the committee. The board of directors will organize the committee in a manner so as to satisfy the provisions of Rule 16b-3 promulgated under Section 16 of the Securities Exchange Act of 1934 and Section 162(m) of the Internal Revenue Code, and the committee will interpret the plan in a manner consistent with the requirements of those rules and regulations. The committee has full authority, subject to the provisions of the plan, among other things, to determine the persons to whom awards will be granted, to determine the type of award to be granted, the number of shares to be made subject to awards, the exercise price and other terms and conditions of the awards, and to interpret the plan and prescribe, amend and rescind rules and regulations relating to the plan. Eligibility. We may grant awards under the plan to our employees, directors, including directors who are not employees, and consultants or any of our affiliates, as selected by the committee. Terms and Conditions of Options. Options may be either incentive stock options, as that is defined in Section 422 of the Internal Revenue Code, or nonqualified stock options. The committee will determine the exercise price of a stock option granted under the plan at the time the option is granted, but the exercise price of an incentive stock option may not be less than the fair market value per share of class A common stock on the date of grant. Stock options are exercisable at the times and upon the conditions that the committee may determine, as reflected in the applicable option agreement. Generally, the committee will determine the exercise period, but in the case of any incentive stock option, the exercise period may not exceed ten years from the date of grant. A participant must pay the option exercise price in full at the time of exercise by any one of the following methods or a combination thereof: . in cash or cash equivalents; . the surrender of previously acquired shares of class A common stock that have been held by the participant for at least six months prior to the date of surrender; . authorization for us to withhold a number of shares otherwise payable upon the exercise of an option; or . through a broker cashless exercise procedure we approve. The committee may, in its sole discretion, authorize us to make or guarantee loans to a participant to assist the participant in exercising options. The committee may provide at the time of grant of an option that the participant may elect to exercise all or part of the option before it becomes vested and exercisable. If the participant elects to exercise all or part of a non-vested option, we will issue the participant shares of restricted stock which will become vested in accordance with the vesting schedule set forth in the original option agreement. The stock will be subject to our repurchase option if the participant's employment or service terminates prior to its vesting. Outside Director Options. Outside directors, which are non-employee directors who own, together with their affiliates, less than 1% of the voting power of our company will be eligible for automatic grants of non-qualified options under the plan. At the time of this offering, each outside director has an option to purchase 10,000 shares of class A common stock. Following this offering, we will grant each outside director upon his or her first election or appointment to the board of directors, an option to purchase up to 10,000 shares of class A common stock. In addition, immediately following each annual meeting of stockholders after the 77 initial public offering, our board of directors may grant, in its sole discretion, to each outside director then serving who has been re-elected or re-appointed at such stockholder meeting, an option to purchase up to 20,000 shares of class A common stock. Each option granted under the plan to an outside director will have an exercise price equal to the fair market value of the class A common stock on the date of grant and will become exercisable in full on the second anniversary of the date of grant, provided that the director is still serving as an outside director as of the date of vesting of the option. Each option granted to an outside director will expire on the tenth anniversary of the date of grant of the option. The other terms of the options granted to outside directors will be consistent with the terms of options granted to employees. Restricted Stock. The plan provides for awards of class A common stock that are subject to restrictions on transferability and other restrictions imposed by the committee. Except to the extent restricted under the awarded agreement relating to the restricted stock, a participant granted restricted stock will have all of the rights of a stockholder. Stock Bonuses; Other Awards. The plan provides that awards of shares of common stock may be made to employees in the discretion of the committee. In addition, the committee, in its discretion, may grant other awards valued in whole or in part by reference to, or otherwise based on, our class A common stock either alone or in addition to other awards under the plan. Termination of Employment. Unless otherwise determined by the committee, we will immediately cancel the unvested portion of awards granted under the plan upon termination of a participant's employment or service with us and if a participant's employment or service terminates other than because of death, disability or retirement, the participant may exercise all options that are exercisable at the time of termination for no longer than 90 days after the date of termination. Unless otherwise determined by the committee, if a participant's employment or service terminates for cause, all options held by the participant will immediately terminate. If a participant's employment or service terminates as a result of death, the participant's heirs or distributees may exercise all options that are exercisable at the time of death for one year and if a participant's employment or service terminates because of disability or retirement, the participant may exercise all options that are exercisable at the time of termination for a period of one year immediately following termination. In no case may a participant exercise an option after it expires in accordance with its terms. Subject to such other conditions as the committee may impose, if, within 18 months following a change in control, an optionee's employment terminated by us without cause or by the optionee for good reason, the unvested portion of the optionee's options will become fully vested and exercisable on the date of termination. Amendment, Termination of Plan. The board of directors may modify or terminate the plan or any portion of the plan at any time, except that an amendment that requires stockholder approval in order for the plan to continue to comply with any law, regulation or stock exchange requirement will not be effective unless approved by the requisite vote of our stockholders. Amendment or termination of the plan cannot adversely affect an outstanding awarded without the awarded holder's consent. The committee may not grant options under the plan after the date immediately preceding the tenth anniversary of its adoption date. Since the committee determines the amount of benefits to be received by any plan participant who is our employee or an employee of any of our affiliates, we cannot determine the amount of future benefits to be allocated by any employee or group of employees under the plan in any particular year. Employee Stock Purchase Plan We have adopted an employee stock purchase plan intended to qualify under Section 423 of the Internal Revenue Code. We have designed the plan to encourage the purchase by our employees of shares of our class A common stock. A committee appointed by our board of directors will administer the plan. Our employees will be able to purchase up to a maximum of 2,000,000 shares of our class A common stock under 78 this plan, subject to equitable adjustment upon the occurrence of any stock dividend or other distribution, stock split, merger, consolidation, combination, share repurchase or exchange or similar corporate transaction or event. The plan is generally open to participation by any employee who has completed at least six months of service and who customarily works at least 20 hours per week. Each eligible employee will be eligible to purchase shares through regular payroll deductions and/or cash payments in an amount equal to 1% to 20% of the employee's compensation for each payroll period, provided that the fair market value of the stock purchased in any year may not exceed $25,000. The plan provides for a series of consecutive, overlapping offering periods that will generally be 24 months long. Successive six-month purchase periods will run during each offering period. During each offering period, participating employees will be able to purchase shares of class A common stock at a purchase price equal to 85% of their fair market value at either the beginning of each offering period or the end of each purchase period within the offering period, whichever price is lower. To the extent permitted by applicable laws, regulations or stock exchange rules, if the fair market value of the shares at the end of any purchase period is lower than the fair market value of the shares on the date the related offering period began, then all participants in that offering period will be automatically withdrawn from the offering period immediately after the exercise of their option on the date the purchase period ends, and the participants will automatically be re-enrolled in the immediately following offering period. The plan will automatically terminate on the tenth anniversary of the beginning of the first offering period. Our board of directors may from time to time amend or terminate the plan, provided that no amendment or termination may adversely affect the rights of any participant without his or her consent and, to the extent required by Section 423 of the Internal Revenue Code or any other law, regulation or stock exchange rule, no such amendment will be effective without the approval of stockholders entitled to vote on the matter. Since the amount of benefits to be received by each participant in the plan is determined by his or her elections, the amount of future benefits to be allocated to any individual or group of individuals under the plan in any particular year is not determinable. 79 RELATED PARTY TRANSACTIONS Registration Rights Agreements On May 4, 2000, we entered into a registration rights agreement with most of our existing stockholders, in which we granted them registration rights in respect of 30.1% of our currently outstanding common stock. We have also agreed to enter into a registration rights agreement with the sellers of Aurora Communications, who will receive shares of our class C common stock as partial consideration towards the purchase price, once we complete this acquisition. Under these registration rights agreements, beginning 180 days after this offering, the holders of the registrable securities will have the right to demand three registrations. Under each demand registration right, holders owning at least 17.5% of the outstanding registrable securities can require us to effect a registration of their shares, and the holders of the other shares subject these registration rights can also require us to register their shares at the same time. The holders of these registrable securities will also have "piggy-back" registration rights. Under these piggy-back registration rights, if we propose to register any other common stock under the Securities Act, we will generally have to register the registrable securities whose holders exercise these piggy-back rights. In addition, once we become eligible to file registration statements on Form S-3, holders of registrable securities generally can require us at any time to register their shares on a Form S-3 registration statement so long as no registration is for less than $5.0 million of registrable securities. All of these registration rights are subject to limitations and conditions, including, in the case of the piggy-back registration rights, the right of underwriters of an offering to limit the number of shares to be included in a registration. We would bear all registration expenses incurred in connection with these registrations, except for any underwriting discounts and selling commissions. In addition, on May 4, 2000, we entered into a registration rights agreement with holders of the 119,419 shares of our class A common stock that were issued upon conversion of the limited partnership units issued with our senior discount notes. Under this registration rights agreement, beginning 180 days after this offering, the holders of these registrable securities have the right to demand two registrations. Under each of these demand registration rights, holders owning at least 10.0% of these shares can require us to effect a registration of their shares, and the holders of the other shares subject these registration rights can also require us to register their shares at the same time. The holders of these registrable securities will also have "piggy- back" registration rights. Under these piggy-back rights, if we propose to register any other common stock under the Securities Act, we will generally have to register the registrable securities whose holders exercise these piggy- back rights. Both the demand and piggy-back registration rights are subject to limitations and conditions, including, in the case of the piggy-back registration rights, the right of underwriters of an offering to limit the number of shares to be included in a registration. We would bear all registration expenses incurred in connection with these registrations, except for any underwriting discounts and selling commissions. Sale of Nassau Tower Holdings LLC On February 7, 2000, we completed the sale of all our membership interests in Nassau Tower Holdings LLC to affiliated entities, namely Nassau Tower Management, Inc. and Nassau Holdings, Inc., controlled by Louis F. Mercatanti, Jr., our President and Chief Executive Officer, pursuant to an agreement which we entered into on same day. Nassau Tower Holdings owned real estate properties on which the broadcasting facilities which we use are located. We determined the sale price of $10.0 million for the membership interests using a valuation methodology that is commonly used in the tower industry and that was based on multiple cash flow of $356,000 for 1998 and $710,000 for 1999. Our board of directors determined this sale of non-strategic assets to be in our best interests, since we required liquidity to enable us to make required interim payments with respect to our pending acquisitions. These affiliated entities then immediately transferred the bulk of the properties owned by Nassau Tower Holdings to Pinnacle Towers Inc., an unrelated entity, which has in turn leased required tower space back to us. In addition, some of our affiliates have leased assets to us. Our lease payments to affiliated entities controlled by Mr. Mercatanti are expected to be approximately $250,000 this year. 80 Subordinated Discount Notes, Redemption and Preferred Distributions From 1995 to 1997, we issued 8.0% subordinated discount notes to some of our existing stockholders. On May 4, 2000, we fully redeemed all of these subordinated discount notes with a portion of the proceeds from the sale of units consisting of our senior discount notes and limited partnership units, as follows.
Issuer Amount Repaid ------ ------------- (in millions) Spectrum Equity Investors, L.P.................................... $18.1 Spectrum Equity Investors II, L.P. ............................... 9.5 Grotech Partners IV, L.P.......................................... 7.7 Toronto Dominion Capital (U.S.A.), Inc............................ 7.1 ----- Total........................................................... $42.4 =====
We used an aggregate of $5.4 million of the proceeds from the sale of the units described above to redeem some equity interests of, and to make a preferred distribution to, Mr. Mercatanti, pursuant to our predecessor's partnership agreement. Loans to Stockholder and Employee In 1998, and November 1999, we advanced an aggregate of $100,000, with an interest rate of 8.0% per annum, due and payable on or prior to November 30, 2001, to Joan E. Gerberding, our President of Nassau Radio Network, to purchase a residence. In December 1999, we loaned an aggregate of $590,000 to Mr. Mercatanti to finance a portion of the purchase price of a communications tower. This loan accrued interest at a rate of 8.0% per annum and was repaid in full by Mr. Mercatanti in February 2000. In March 2000, we loaned $200,000 interest-free to Mr. Mercatanti to enable him to purchase some real property. Mr. Mercatanti repaid this loan in full in May 2000. 81 PRINCIPAL STOCKHOLDERS The following table sets forth information with respect to the beneficial ownership of our common stock upon our incorporation and as adjusted to reflect the sale of the shares of class A common stock offered hereby by: . each person who we know owns beneficially more than 5.0% of our common stock; . each of our directors, including our chief executive officer; . our four most highly compensated executive officers, other than our chief executive officer, who were serving as executive officers of our general partner at the end of 1999; and . all of our directors and executive officers as a group.
Common Stock ---------------------------------------------------- Class A Class B Class C ---------------- ------------------ ---------------- % of Total % of Total % of % of % of Economic Voting Number Class Class Number Class Interest Power of Post- Number of Post- of Post- Post- Post- Stockholder Shares Offering Shares Offering Shares Offering Offering Offering ----------- ------ -------- --------- -------- ------- -------- ---------- ---------- Spectrum Equity Investors, L.P. (1)............... -- -- % 1,789,534 37.4% -- -- % 9.7% 29.5% Spectrum Equity Investors II, L.P. (1)............... -- -- 1,015,043 21.2 -- -- 5.5 16.7 Grotech Partners IV, L.P. (2)............... -- -- 759,464 15.9 -- -- 4.1 12.5 Toronto Dominion Capital (U.S.A.), Inc. (3)..... -- -- -- -- 761,280 100.0 4.1 0.0 Louis F. Mercatanti, Jr. (4)(5)................. -- -- 1,211,823 25.4 -- -- 6.6 20.0 Michael S. Libretti (4).................... 74,235 0.6 -- -- -- -- 0.4 0.1 Joan E. Gerberding (4).. 34,025 0.3 -- -- -- -- 0.2 0.1 G. Daniel Henrickson, Jr. (4)................ 34,025 0.3 -- -- -- -- 0.2 0.1 Peter D. Tonks (4)...... 10,764 0.1 -- -- -- -- 0.1 0.0 Brion B. Applegate(6)... -- -- 2,804,577 58.6 -- -- 15.2 46.2 William B. Collatos(6).. -- -- 2,804,577 58.6 -- -- 15.2 46.2 Stuart D. Frankel....... -- -- 759,464 15.9 -- -- 4.1 12.5 All directors and executive officers as a group (12 persons)(6).. 226,667 1.8 4,775,864 99.9 -- -- 27.2 79.1
(1) The address of both Spectrum Equity Investors, L.P. and Spectrum Equity Investors II, L.P. is 333 Middlefield Road, Suite 200, Menlo Park, CA 94025. (2) The address of Grotech Partners IV, L.P. is 9690 Deerco Road, Timonium, MD 21093. (3) The address of Toronto Dominion Capital (U.S.A.), Inc. is c/o TD Securities USA, Inc., 31 West 52nd Street, New York, NY 10019. (4) The address of Mr. Mercatanti, Mr. Libretti, Ms. Gerberding, Mr. Henrickson and Mr. Tonks is c/o Nassau Broadcasting Corporation, 619 Alexander Road, Princeton, New Jersey 08540. (5) Includes 18,559 shares of class B common stock held by Mr. Mercatanti, 290,755 shares of class B common stock held directly by Nassau Broadcasting Company and 902,509 shares of class B common stock held directly by Nassau Holdings, Inc. Mr. Mercatanti has the power to vote or direct the vote, and the power to dispose or direct the disposition, of the shares owned by Nassau Broadcasting Company and Nassau Holdings, Inc. 82 (6) Includes the 1,789,534 shares of class B common stock held directly by Spectrum Equity Investors L.P. and the 1,015,043 shares of class B common stock held directly by Spectrum Equity Investors II, L.P. Mr. Applegate and Mr. Collatos together have the power to vote or direct the voting of, and the power to dispose or direct the disposition of, the shares held by Spectrum Equity Investors L.P. and Spectrum Equity Investors II, L.P. The table above does not give effect to the 1,258,147 million shares of class C common stock to be acquired by BancAmerica Capital Investors SBIC I, L.P. and several individuals in connection with the Aurora Communications acquisition on the closing date of that acquisition. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares of common stock. The number of shares beneficially owned includes shares of common stock issuable upon the exercise of options or warrants that are currently exercisable or exercisable within 60 days of the date of this prospectus. Percentage of beneficial ownership is based on 18,395,947 shares of common stock outstanding after completion of this offering, which includes vested options to purchase shares of our common stock. 83 DESCRIPTION OF CAPITAL STOCK The following description of our capital stock and provisions of our certificate of incorporation and by-laws is only a summary. For a more detailed description, see our certificate of incorporation and by-laws, copies of which we have filed as exhibits to our registration statement. Our authorized capital stock consists of 67,000,000 shares of class A common stock, par value $0.01 per share, 15,000,000 shares of class B common stock, par value $0.01 per share, 8,000,000 shares of class C common stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01 per share. Common Stock On the closing date of this offering, there will be issued and outstanding 12,544,419 shares of class A common stock, excluding shares to be issued if the underwriters exercise their over-allotment options, 4,780,931 shares of class B common stock and 761,280 shares of class C common stock. Voting rights. Each share of class A common stock will be entitled to one vote and each share of class B common stock will be entitled to ten votes, while shares of class C common stock will generally not be entitled to any votes. Except as otherwise provided by law, and subject to any voting rights granted to holders of any outstanding shares of preferred stock, the holders of our outstanding shares of class A common stock and the holders of our outstanding shares of class B common stock will vote on all matters on which stockholders are entitled to vote. Except as otherwise provided by law, and subject to any voting rights granted to holders of any outstanding preferred stock, amendments to the certificate of incorporation must be approved by a majority of votes entitled to be cast by all holders of class A common stock and class B common stock, voting together as a single class. However, amendments to the certificate of incorporation that would alter or change the powers, preferences or special rights of the class A common stock, class B common stock or class C common stock so as to affect them adversely also must be approved by a majority of the votes entitled to be cast by the holders of the shares affected by the amendment, voting as a separate class. Any amendment to our certificate of incorporation to increase or decrease the authorized shares of any class requires the approval of the holders of a majority of the common stock, voting together as a single class. Dividends. Holders of class A common stock, class B common stock and class C common stock will share equally on a per share basis, based on the number of shares of common stock held, in any dividend declared by the board of directors, subject to any preferential rights of any outstanding preferred stock. Dividends consisting of shares of class A common stock, class B common stock and class C common stock may be paid only as follows: (1) shares of class A common stock may be paid only to holders of shares of class A common stock, shares of class B common stock may be paid only to holders of class B common stock and shares of class C common stock may be paid only to holders of shares of class C common stock; and (2) shares will be paid proportionally with respect to each outstanding share of class A common stock, class B common stock and class C common stock. We may not subdivide or combine shares of any class of common stock without at the same time proportionally subdividing or combining shares of the other classes. Conversion of class A common stock. Class A common stock is convertible into shares of class C common stock at any time on a one-for-one basis. Conversion of class B common stock. Class B common stock is convertible into shares of class A common stock or class C common stock at any time on a one-for-one basis. In addition, upon a transfer to anyone other than a permitted class B transferee, shares of class B common stock automatically convert into shares of class A common stock on a one-for-one basis. Conversion of class C common stock. Class C common stock is convertible into shares of class A or class B common stock at the option of the holder, at any time on a one-for-one basis, so long as, in the opinion 84 of our board of directors, the holder would not have an attributable interest in radio stations pursuant to the FCC's multiple ownership rules as a result of such conversion. However, shares of common stock which were converted into class C from class A, cannot then be converted into shares of class B common stock. Other rights. In the event of any merger or consolidation with or into another company in connection with which shares of common stock are converted into or exchangeable for shares of stock, other securities or property, including cash, all holders of common stock, regardless of class, will be entitled to receive the same kind and amount of shares of stock and other securities and property, including cash. On liquidation, dissolution or winding up, after payment in full of the amounts required to be paid to holders of preferred stock, if any, all holders of common stock, regardless of class, are entitled to share ratably in any assets available for distribution to holders of shares of common stock. No shares of any class of common stock are subject to redemption or have preemptive rights to purchase additional shares of common stock. Upon consummation of the offering, all the outstanding shares of our common stock will be legally issued, fully paid and nonassessable. Preferred Stock The board of directors will be authorized, without stockholder approval, to issue from time to time up to 10,000,000 shares of preferred stock in one or more series and to fix or alter the designations, preferences, rights and any qualifications, limitations or restrictions of the shares of each series. The specific matters that our board may determine include the following: . the designation of each series; . the number of shares of each series; . the rate of any dividends; . whether any dividends will be cumulative or noncumulative; . the terms of any redemption; . the amount payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of our company; . rights and terms of any conversion or exchange; . restrictions on the issuance of shares of the same series or any other series; and . any voting rights. Upon the closing of the offering, there will be no shares of preferred stock outstanding. We have no present plans to issue any shares of preferred stock. See "--Anti-takeover Effects of Provisions of Delaware law and Our Certificate of Incorporation and By-Laws" for more information. Options As of the date of this prospectus, options to purchase a total of 309,317 shares of class A common stock were outstanding, all of which are subject to lockup agreements entered into with the underwriters. The total of shares of class A common stock that may be subject to the granting of options under our 2000 stock incentive plan will be equal to 2,000,000 shares of class A common stock. We refer you to "Management--2000 Stock Incentive Plan", and "Shares Eligible for Future Sale." 85 Limitation on Liability of Directors Our certificate of incorporation provides that our directors will not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except for liability imposed by law, as in effect from time to time: . for any breach of the director's duty of loyalty to us or our stockholders; . for any act or omission not in good faith or which involved intentional misconduct or a knowing violation of law; . for unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or . for any transaction from which the director derived an improper personal benefit. The inclusion of this provision in our certificate of incorporation may have the effect of reducing the likelihood of derivative litigation against or directors and may discourage or deter stockholders or us from bringing a lawsuit against our directors for breach of their duty of care, even though such an action, if successful, might otherwise have benefitted us and our stockholders. Foreign Ownership Our certificate of incorporation restricts the ownership, voting and transfer of our capital stock, including the class A common stock, in accordance with the Communications Act and the rules of the FCC, which prohibit the issuance of more than 25% of our outstanding capital stock, or more than 25% of the voting rights such stock represents, to or for the account of aliens, as defined by the FCC, or corporations otherwise subject to domination or control by aliens. Our certificate of incorporation prohibits any transfer of our capital stock that would cause a violation of this prohibition. Our certificate of incorporation authorizes the board of directors to take action to enforce these prohibitions, including restricting the transfer of shares of capital stock to aliens and placing a legend restricting foreign ownership on the certificates representing the class A common stock. In addition, our certificate of incorporation provides for the redemption of shares of our capital stock by action of the board of directors to the extent necessary to comply with alien ownership restrictions. Anti-takeover Effects of Provisions of Delaware Law and Our Certificate of Incorporation and By-Laws Some of the provisions of our certificate of incorporation and by-laws and Section 203 of the Delaware General Corporation Law could have the following effects, among others: . delaying, deferring or preventing a change in control; . delaying, deferring or preventing the removal of our existing management; . deterring potential acquirors from making an offer to our stockholders; and . limiting our stockholders' opportunity to realize premiums over prevailing market prices of our class A common stock in connection with offers by potential acquirors. This could be the case, notwithstanding that a majority of our stockholders might benefit from such a change in control or offer. The following is a summary of these provisions. A classified board of directors. We have a classified board of directors, which means that our board is divided into three classes with three-year terms with only one class elected at each annual meeting of stockholders. As a result, a holder of a majority of our common stock will need two annual meetings of stockholders to gain control of the board. 86 Directors, and not stockholders, fix the size of our board of directors. Our certificate of incorporation and by-laws provide that the number of directors shall be fixed from time to time exclusively pursuant to a resolution adopted by a majority of our board of directors, but in no event shall it consist of less than one nor more than eight members. Board vacancies to be filled by remaining directors, and not stockholders. Our certificate of incorporation and by-laws provide that any vacancy on the board of directors that results from an increase in the number of directors may be filled by a majority of the board of directors then in office, provided that a quorum is present, and any other vacancy occurring on the board of directors will be filled by the affirmative vote of the majority of the remaining directors, even if less than a quorum, or by a sole remaining director. In any event, no vacancy shall be filled by our stockholders. Advance notice for stockholder proposals. Our by-laws contain provisions requiring that advance notice be delivered to us of any business to be brought by a stockholder before an annual meeting and providing for procedures to be followed by stockholders in nominating persons for election to our board of directors. Generally, such advance notice provisions require that the stockholder must give written notice to us not less than 120 calendar days before the anniversary date of the date our proxy statement was released to stockholders in connection with our previous year's annual meeting, unless the annual meeting is called for a date not within 30 days of such anniversary date, in which case the stockholder must receive notice no later than the 10th day following the day on which the notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever occurs first. Our by-laws provide that the notice must set forth specific information regarding the stockholder and each director nominee by the stockholder or other business proposed by the stockholder. Section 203 of the Delaware General Corporation Law. We are a Delaware corporation and subject to Section 203 of the Delaware General Corporation Law. Generally, Section 203 prohibits a publicly held Delaware company from engaging in a "business combination" with an "interested stockholder" for a period of three years after the time such stockholder became an interested stockholder unless, as described below, specified conditions are satisfied. Thus, it may make it more difficult for third parties to acquire control of us. The prohibitions in Section 203 of the Delaware General Corporation Law do not apply if: . prior to the time the stockholder became an interested stockholder, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; . upon consummation of the transaction, which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85.0% of the voting stock of the corporation outstanding at the time the transaction commenced; and . at or subsequent to the time the stockholder became an interested stockholder, the business combination is approved by the board of directors and authorized by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder. Under Section 203 of the Delaware General Corporation Law, a "business combination" includes: . any merger or consolidation of the corporation with the interested stockholder; . any sale, lease, exchange or other disposition, except proportionately as a stockholder of such corporation, to or with the interested stockholder of assets of the corporation having an aggregate market value equal to 10.0% or more of either the aggregate market value of all the assets of the corporation or the aggregate market value of all the outstanding stock of the corporation; . transactions resulting in the issuance or transfer by the corporation of stock of the corporation to the interested stockholder; . transactions involving the corporation, which have the effect of increasing the proportionate share of the corporation's stock of any class or series that is owned by the interested stockholder; and . transactions in which the interested stockholder receives financial benefits provided by the corporation. 87 Under Section 203 of the Delaware General Corporation Law, an "interested stockholder" generally is: . any person that owns 15.0% or more of the outstanding voting stock of the corporation; . any person that is an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation at any time within the three-year period immediately prior to the date on which it is sought to be determined whether or not such person is an interested stockholder; or . the affiliates or associates of either of the above-stated categories person. Under some circumstances, Section 203 of the Delaware General Corporation Law makes it more difficult for an "interested stockholder" to effect various business combinations with us for a three-year period, although our stockholders may elect to exclude us from the restrictions imposed thereunder. Registration Rights All of our current stockholders have, or will have, registration rights for their securities. Registration of these securities under the Securities Act would result in those shares becoming freely tradeable by persons not affiliated with us. For a more complete explanation of these registration rights, you should read "Related Party Transactions--Registration Rights Agreement" and "Shares Eligible for Future Sale--Registration Rights." Transfer Agent and Registrar The transfer agent and registrar for our class A common stock is American Stock Transfer & Trust Company. Nasdaq Stock Market Listing We expect the shares to be approved for quotation on The Nasdaq National Market, subject to notice of issuance, under the symbol "NBCR." 88 SHARES ELIGIBLE FOR FUTURE SALE Prior to the offering, there has been no public market for our common stock. Although we can make no prediction as to the effect, if any, that sales of shares of common stock by our existing stockholders would have on the market price of our class A common stock prevailing from time to time, sales of substantial amounts of common stock or the availability of the shares for sale could adversely affect prevailing market prices. Upon completion of the offering, we will have outstanding 12,544,419 shares of class A common stock, 4,780,931 shares of class B common stock and 761,280 shares of class C common stock. If the underwriters exercise their over-allotment options in full, we will have a total of 14,408,169 shares of class A common stock outstanding, 4,780,931 shares of class B common stock outstanding and 761,280 shares of class C common stock outstanding. All of the shares of class A common stock to be sold in the offering will be freely tradable without restrictions or further registration under the Securities Act, except that shares purchased by our "affiliates" as defined in Rule 144 under the Securities Act will be subject to the resale limitations of Rule 144. The shares of class A common stock, class B common stock and class C common stock owned by our existing stockholders are "restricted securities" within the meaning of Rule 144 and may not be sold in the absence of registration under the Securities Act other than pursuant to Rule 144 under the Securities Act or another exemption from registration under the Securities Act. Shares of our class A common stock, class B common stock and class C common stock outstanding prior to this offering and any shares of common stock acquired by any of our affiliates will be subject to the resale limitations of Rule 144 of the Securities Act. Rule 144 defines an affiliate as a person that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, the issuer. In general, beginning 90 days after the date of this prospectus, a stockholder who has beneficially owned shares of our common stock for at least one year may, within any three-month period, sell up to the greater of: . 1.0% of the total number of shares of class A common stock then outstanding; or . the average weekly trading volume of the shares of class A common stock during the four calendar weeks preceding the stockholder's required filing of notice of sale. Rule 144 requires stockholders to aggregate their sales with other stockholders with which it is affiliated for purposes of complying with this volume limitation. A stockholder who has owned shares of our common stock for at least two years, and who has not been our affiliate for at least three months, may sell shares of our common stock free from the volume limitation and notice requirements of Rule 144. The shares of class A common stock authorized for issuance pursuant to options that may be granted under the 2000 stock incentive plan or the employee stock purchase plan may be either authorized but unissued shares or treasury shares obtained by us through market or private purchases. See "Management-- 2000 Stock Incentive Plan" and "Management--Employee Stock Purchase Plan." We intend to register under the Securities Act the shares of common stock issuable upon the exercise of options granted pursuant to the 2000 stock incentive plan and the employee stock purchase plan. We and our executive officers and directors and most of our existing stockholders have agreed, with limited exceptions, not to sell or transfer any common stock for 180 days after the date of this prospectus without first obtaining the written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon Smith Barney Inc. Specifically, we and these other individuals have agreed not to directly or indirectly: . offer, pledge, sell or contract to sell any common stock, other than common stock issued by us in connection with our purchase of Aurora Communications; 89 . sell any option or contract to purchase any common stock; . purchase any option or contract to sell any common stock; . grant any option, right or warrant for the sale of any common stock, other than pursuant to our stock incentive plan; . lend or otherwise dispose of or transfer any common stock; . request or demand that we file a registration statement related to any common stock; or . enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of any common stock whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or otherwise. This lockup provision applies to common stock and to securities convertible into or exchangeable or exercisable for or repayable with common stock. It also applies to common stock owned now or acquired later by the person executing the agreement or for which the person executing the agreement later acquires the power of disposition. As a result of contractual restrictions, notwithstanding possible earlier eligibility for sale under the provisions of Rule 144 promulgated under the Securities Act, which are summarized above, shares subject to lockup agreements will not be saleable until the agreements expire. Registration Rights We have granted registration rights to most of our existing stockholders pursuant to the registration rights agreement described in "Related Party Transactions--Registration Rights Agreement." 90 MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES TO NON-U.S. HOLDERS OF OUR CLASS A COMMON STOCK The following is a general summary of the material United States federal income and estate tax consequences of the purchase, ownership, and sale or other taxable disposition of our class A common stock by any person or entity, who we refer to as a non-U.S. Holder, other than: . a citizen or individual resident of the United States; . a partnership, corporation or other entity created or organized in or under the laws of the United States or of any political subdivision thereof; . a trust, if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust or the trust has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person; and . an estate, the income of which is includible in gross income for United States federal income tax purposes regardless of its source. This summary does not address all tax considerations that may be relevant to non-U.S. Holders in light of their particular circumstances or to certain non-U.S. Holders that may be subject to special treatment under United States federal income or estate tax laws. This summary is based upon the Internal Revenue Code of 1986, as amended, existing, temporary and proposed Treasury regulations promulgated thereunder, and administrative and judicial decision thereof, all as in effect on the date of this prospectus and all of which are subject to change, possibly with retroactive effect. In addition, this summary does not address the effect of any state, local or foreign tax laws. Each prospective purchaser of class A common stock should consult its tax advisor with respect to the tax consequences of purchasing, owning and disposing of the class A common stock. Dividends Dividends paid to a non-U.S. Holder of class A common stock generally will be subject to a withholding of United States federal income tax at a 30 percent rate or such lower rate as may be specified by an applicable income tax treaty unless: . the dividend is effectively connected with the conduct of a trade or business of the non-U.S. Holder within the United States; or . if an income tax treaty applies, it is attributable to a United States permanent establishment of the non-U.S. Holder, in which case the dividend will be taxed at ordinary United States federal income tax rates. If the non-U.S. Holder is a corporation, such effectively connected income may also be subject to an additional "branch profits tax" equal to 30.0% of its effectively connected earnings and profits for the taxable year, as adjusted for certain items, unless an applicable income tax treaty provides otherwise. A non-U.S. Holder generally is required to satisfy certain certification requirements in order to claim treaty benefits or otherwise claim a reduction of, or exemption from, the withholding described above. 91 Sale or Other Disposition of Common Stock A non-U.S. Holder generally will not be subject to United States federal income tax in respect of any gain recognized on the sale or other taxable disposition of class A common stock unless one of the following applies: . the gain is effectively connected with the conduct of a trade or business of the non-U.S. Holder within the United States; and, if an income treaty applies, is attributable to a U.S. permanent establishment of the non-U.S. Holder. Unless an applicable income tax treaty provides otherwise, the non-U.S. Holder will be taxed on its net effectively connected gain derived from the sale under the regular graduated United States federal income tax rates. If the non- U.S. Holder is a foreign corporation, it may be subject to an additional branch profits tax equal to 30.0% of its effectively connected earnings and profits for the taxable year, as adjusted for certain items, unless an applicable income tax treaty provides otherwise; . in the case of a non-U.S. Holder who is an individual and holds the class A common stock as a capital asset, the holder is present in the United States for 183 or more days in the taxable year of the sale or other taxable disposition and certain other tests are met; in this case, the non-U.S. Holder will be subject to a flat 30.0% tax on the gain derived from the sale, which may be offset by certain United States capital losses; . the non-U.S. Holder is subject to tax pursuant to the provisions of United States federal income tax law applicable to certain United States expatriates; or . we are or have been a "United States real property holding corporation" at any time during the five-year period ending on the date of disposition or, if shorter, the non-U.S. Holder's holding period, unless both (i) the non-U.S. Holder held, actually or constructively, no more than 5.0% of our outstanding class A common stock and (ii) our stock is "regularly traded on an established securities market," for purpose of these rules. We believe that we will not constitute a United States real property holding corporation immediately after the offering and we do not expect to become a United States real property holding corporation. Estate Tax Class A common stock owned or treated as owned by an individual non-U.S. Holder at the time of death will be includible in the individual's gross estate for United States federal estate tax purposes, unless an applicable estate treaty provides otherwise, and may be subject to United States federal estate tax. Backup Withholding Under the backup withholding rules, dividends payable to a non-U.S. holder and the proceeds from any disposition of class A common stock by a non- U.S. holder may be subject to backup withholding at the rate of 31.0% unless the non-U.S. holder (i) is a corporation or comes within certain other exempt categories and demonstrates that fact when required or (ii) provides a current taxpayer identification number, certifies as to no loss of exemption from backup withholding, and otherwise complies with applicable requirements of the backup withholding rules. 92 UNDERWRITING We intend to offer the shares in the U.S. and Canada through the U.S. underwriters and elsewhere through the international managers. Merrill Lynch, Pierce, Fenner & Smith Incorporated, Salomon Smith Barney Inc., Banc of America Securities LLC, Lazard Freres & Co. LLC and Prudential Securities Incorporated are acting as U.S. representatives of the U.S. underwriters named below. Subject to the terms and conditions described in a U.S. purchase agreement among us and the U.S. underwriters, and concurrently with the sale of 2,485,000 shares to the international managers, we have agreed to sell to the U.S. underwriters, and the U.S. underwriters severally have agreed to purchase from us, the number of shares listed opposite their names below.
Number U.S. Underwriter of Shares ---------------- --------- Merrill Lynch, Pierce, Fenner & Smith Incorporated............................................ Salomon Smith Barney Inc. ....................................... Banc of America Securities LLC .................................. Lazard Freres & Co. LLC.......................................... Prudential Securities Incorporated............................... --------- Total....................................................... 9,940,000 =========
We have also entered into an international purchase agreement with the international managers, for whom Merrill Lynch International, Salomon Brothers International Limited, Bank of America International Limited, Lazard Capital Markets and Prudential-Bache International Limited are acting as lead managers, for sale of the shares outside the U.S. and Canada. Subject to the terms and conditions in the international purchase agreement, and concurrently with the sale of 9,940,000 shares to the U.S. underwriters pursuant to the U.S. purchase agreement, we have agreed to sell to the international managers, and the international managers severally have agreed to purchase 2,485,000 shares from us. The initial public offering price per share and the total underwriting discount per share are identical under the U.S. purchase agreement and the international purchase agreement. The U.S. underwriters and the international managers have agreed to purchase all of the shares sold under the U.S. and international purchase agreements if any of these shares are purchased. If an underwriter defaults, the U.S. and international purchase agreements provide that the purchase commitments of the nondefaulting underwriters may be increased or the purchase agreements may be terminated. The closings for the sale of shares to be purchased by the U.S. underwriters and the international managers are conditioned on one another. We have agreed to indemnify the U.S. underwriters and the international managers against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the U.S. underwriters and international managers may be required to make in respect of those liabilities. The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the purchase agreements, such as the receipt by the underwriters of officer's certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part. Commissions and Discounts The U.S. representatives have advised us that the U.S. underwriters propose initially to offer the shares to the public at the initial public offering price on the cover page of this prospectus and to dealers at that price less a concession not in excess of $ per share. The U.S. underwriters may allow, and the dealers may reallow, a discount not in excess of $ per share to other dealers. After the initial public offering, the public offering price, concession and discount may be changed. 93 The following table shows the public offering price, underwriting discount and proceeds before expenses to Nassau. In addition, the table includes certain other items considered by the NASD to be underwriting compensation for purposes of the NASD's Conduct Rules. The information assumes either no exercise or full exercise by the U.S. underwriters and the international managers of their over-allotment options.
Per Share Without Option With Option --------- -------------- ----------- Public offering price.................. $ $ $ Underwriting discount.................. $ $ $ Proceeds, before expenses, to Nassau... $ $ $ Other items............................ $ $ $
Merrill Lynch Capital Corporation, an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated, owns 39,806 shares of our class A common stock which were received upon conversion of limited partnership units acquired in connection with our recapitalization. The compensation in the table above in the line titled "other items" was computed based on the difference between the $ offering price and $ , the price deemed to be paid for the shares of class A common stock held by Merrill Lynch Capital Corporation. The expenses of the offering, not including the underwriting discount, are estimated at $1,920,000 and are payable by us, as set forth in the following table. SEC registration fee................................................ $ 62,324 NASD filing fee..................................................... 22,300 Nasdaq National Market listing fee.................................. 87,000 Printing and engraving expenses..................................... 400,000 Legal fees and expenses............................................. 600,000 Accounting fees and expenses........................................ 550,000 Blue sky fees and expenses (including legal fees)................... 7,500 Transfer agent and registrar fees and expenses...................... 3,500 Premiums for director and officer insurance......................... 175,883 Miscellaneous....................................................... 11,493 ---------- Total............................................................. $1,920,000 ==========
Over-allotment Options We have granted an option to the U.S. underwriters to purchase up to 1,491,000 additional shares at the public offering price less the underwriting discount. The U.S. underwriters may exercise this option for 30 days from the date of this prospectus solely to cover any over-allotments. If the U.S. underwriters exercise this option, each will be obligated, subject to conditions contained in the purchase agreements, to purchase a number of additional shares proportionate to that U.S. underwriter's initial amount reflected in the above table. We have also granted an option to the international managers, exercisable for 30 days from the date of this prospectus, to purchase up to 372,750 additional shares to cover any over-allotments on terms similar to those granted to the U.S. underwriters. Intersyndicate Agreement The U.S. underwriters and the international managers have entered into an intersyndicate agreement that provides for the coordination of their activities. Under the intersyndicate agreement, the U.S. underwriters and the international managers may sell shares to each other for purposes of resale at the initial public offering price, less an amount not greater than the selling concession. Under the intersyndicate agreement, the U.S. underwriters and any dealer to whom they sell shares will not offer to sell or sell shares to persons who are 94 non-U.S. or non-Canadian persons or to persons they believe intend to resell to persons who are non-U.S. or non-Canadian persons, except in the case of transactions under the intersyndicate agreement. Similarly, the international managers and any dealer to whom they sell shares will not offer to sell or sell shares to U.S. persons or Canadian persons or to persons they believe intend to resell to U.S. or Canadian persons, except in the case of transactions under the intersyndicate agreement. Reserved Shares At our request, the underwriters have reserved for sale, at the initial public offering price, up to 621,250 shares offered by this prospectus for sale to some of our directors, officers, employees and business associates. If these persons purchase reserved shares, this will reduce the number of shares available for sale to the general public. Any reserved shares that are not orally confirmed for purchase within one day of the pricing of this offering will be offered by the underwriters to the general public on the same terms as the other shares offered by this prospectus. Purchasers of shares pursuant to the reserved share program generally will not be subject to lock-up agreements in respect of the shares so purchased unless required by the Conduct Rules of the NASD. The NASD's Conduct Rules will require that some purchasers of shares who are affiliated or associated with NASD members or who hold senior positions at financial institutions or members of their immediate families be subject to three-month lock up agreements. No Sales of Similar Securities We and our executive officers and directors and most of our existing stockholders have agreed, with limited exceptions, not to sell or transfer any common stock for 180 days after the date of this prospectus without first obtaining the written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon Smith Barney Inc. Specifically, we and these other individuals have agreed not to directly or indirectly: . offer, pledge, sell or contract to sell any common stock, other than common stock issued by us in connection with our purchase of Aurora Communications; . sell any option or contract to purchase any common stock; . purchase any option or contract to sell any common stock; . grant any option, right or warrant for the sale of any common stock, other than pursuant to our stock incentive plan; . lend or otherwise dispose of or transfer any common stock; . request or demand that we file a registration statement related to any common stock; or . enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of any common stock whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or otherwise. This lockup provision applies to common stock and to securities convertible into or exchangeable or exercisable for or repayable with common stock. It also applies to common stock owned now or acquired later by the person executing the agreement or for which the person executing the agreement later acquires the power of disposition. Quotation on the Nasdaq National Market We expect the shares to be approved for quotation on the Nasdaq National Market, subject to notice of issuance, under the symbol "NBCR." 95 Before this offering, there has been no public market for our class A common stock. The initial public offering price will be determined through negotiations among us and the U.S. representatives and lead managers. In addition to prevailing market conditions, the primary factors to be considered in determining the initial public offering price are: . the valuation multiples of publicly traded companies that the U.S. representatives and the lead managers believe to be comparable to us; . our financial information; . the history of, and the prospects for, our company and the industry in which we compete; . an assessment of our management, its past and present operations, and the prospects for, and timing of, our future revenues; . the present state of our development; . the general condition of the securities market at the time of this offering; and . the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours. An active trading market for the shares may not develop. It is also possible that after the offering the shares will not trade in the public market at or above the initial public offering price. The underwriters do not expect to sell more than 5% of the shares in the aggregate to accounts over which they exercise discretionary authority. Price Stabilization, Short Positions and Penalty Bids Until the distribution of the shares is completed, SEC rules may limit underwriters and selling group members from bidding for and purchasing our class A common stock. However, the U.S. representatives may engage in transactions that stabilize the price of the class A common stock, such as bids or purchases to peg, fix or maintain that price. If the underwriters create a short position in the class A common stock in connection with the offering, i.e., if they sell more shares than are listed on the cover of this prospectus, the U.S. representatives may reduce that short position by purchasing shares in the open market. The U.S. representatives may also elect to reduce any short position by exercising all or part of the over- allotment options described above. Purchases of the class A common stock to stabilize its price or to reduce a short position may cause the price of the class A common stock to be higher than it might be in the absence of such purchases. The U.S. representatives may also impose a penalty bid on underwriters and selling group members. This means that if the U.S. representatives purchase shares in the open market to reduce the underwriters' short position or to stabilize the price of such shares, they may reclaim the amount of the selling concession from the underwriters and selling group members who sold those shares. The imposition of a penalty bid may also affect the price of the shares in that it discourages resales of those shares. Neither we nor any of the underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the class A common stock. In addition, neither we nor any of the underwriters makes any representation that the U.S. representatives or the lead managers will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice. These transactions may be effected on the Nasdaq National Market, in the over- the-counter market or otherwise. Electronic Prospectus Merrill Lynch will facilitate Internet distribution for this offering to certain of its Internet subscription customers. Merrill Lynch intends to allocate a limited number of shares for sale to its online brokerage customers. An electronic prospectus is available on the website maintained by Merrill Lynch. 96 Prudential Securities Incorporated facilitates the marketing of new issues online through its PrudentialSecurities.com division. Clients of Prudential Advisor SM, a full service brokerage firm program, may view offering terms and a prospectus online and place orders through their financial advisors. Other than the prospectus in electronic format, the information on the websites maintained by Merrill Lynch and PrudentialSecurities.com and relating to this offering is not intended to be part of this prospectus. Other Relationships Merrill Lynch, Pierce, Fenner & Smith Incorporated has acted as our financial advisor in connection with our pending acquisition of Aurora Communications and our reorganization. In addition, Merrill Lynch has acted as sole placement agent with respect to our units consisting of senior discount notes and limited partnership units, and as sole lead arranger, book running manager and syndication agent with respect to our new credit facility. Merrill Lynch has received customary fees and commissions for these transactions. Merrill Lynch Capital Corporation, an affiliate of Merrill Lynch, owns $20.0 million aggregate principal amount of our senior discount notes and 39,806 shares of our class A common stock. Merrill Lynch Capital Corporation is also a lender under our new credit facility. BancAmerica Capital Investors SBIC I, L.P., an affiliate of Banc of America Securities LLC, will acquire 1,258,147 shares of our class C common stock in connection with the Aurora Communications acquisition. Merrill Lynch Capital Corporation has agreed that it will not, with limited exceptions, sell, transfer, assign, pledge or hypothecate any shares of class A common stock for one year after the date of this prospectus. 97 LEGAL MATTERS The validity of the class A common stock offered in this prospectus and certain other legal matters will be passed upon for us by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York. Certain legal matters will be passed upon for the underwriters by Shearman & Sterling, New York, New York. EXPERTS The historical financial statements of Nassau Broadcasting Partners, L.P. as of December 31, 1998 and 1999, and for each of the three years in the period ended December 31, 1999 appearing in this prospectus and registration statement were audited by Grant Thornton LLP, independent auditors, as set forth in their report thereon appearing elsewhere in this prospectus and registration statement, and are included in reliance upon such report given on their authority as experts in accounting and auditing. The consolidated financial statements of Aurora Communications, LLC as of December 31, 1999, and for the period January 20, 1999, the date of commencement of operations, to December 31, 1999 appearing in this prospectus have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere in this prospectus, and are included in reliance upon such report given on their authority as experts in accounting and auditing. The combined financial statements of radio stations WODE(FM) and WEEX(AM) as of December 31, 1998 and 1999, for the period from January 29, 1998, the date of commencement of operations by Clear Channel Communications, Inc., to December 31, 1998 and for the year ended December 31, 1999 appearing in this prospectus and registration statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere in this prospectus and registration statement and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing. The combined financial statements of WEBE and WICC Radio Stations, divisions of ML Media Partners, L.P., as of December 31, 1997 and 1998 and August 31, 1999 for each of the three years in the period ended December 31, 1998 and for the period January 1, 1999 to August 31, 1999 appearing in this prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports thereon appearing elsewhere in this prospectus, and are included in reliance upon such reports given on their authority as experts in accounting and auditing. The historical financial statements of (i) Capstar Trust, as of December 31, 1998 and October 26, 1999, for the period May 29, 1998, the date of inception, to December 31, 1998 and for the period January 1, 1999 to October 26, 1999; (ii) Westchester Radio, LLC as of December 31, 1998 and October 26, 1999, for the period April 2, 1998, the date of inception, to December 31, 1998 and for the period January 1, 1999 to October 26, 1999; (iii) Commodore Media of Westchester, Inc. as of December 31, 1996 and 1997 and as of April 1, 1998, for each of the two years in the period ended December 31, 1997 and for the period from January 1, 1998 to April 1, 1998; (iv) WRKI, WAXB, WPUT, and WINE, operating divisions of Commodore Media of Norwalk, Inc., as of December 31, 1997 and May 29, 1998, for the year ended December 31, 1997 and for the period from January 1, 1998 to May 29, 1998; and (v) WRKI, WAXB, WPUT, WZZN and WINE, operating divisions of Commodore Media of Norwalk, Inc., as of December 31, 1996 and for the year then ended, appearing in this prospectus were audited by Weeks Holderbaum Huber & DeGraw, LLP, independent auditors, as set forth in their reports thereon appearing elsewhere in this prospectus, and are included in reliance upon such reports given on their authority as experts in accounting and auditing. 98 WHERE YOU CAN FIND ADDITIONAL INFORMATION We have filed a registration statement on Form S-1 with the SEC covering our class A common stock. For further information about us and the class A common stock, you should refer to our registration statement and its exhibits. This prospectus summarizes material provisions of contracts and other documents to which we refer you. Since the prospectus may not contain all the information that you may find important, you should review the full text of these documents. We have included copies of these documents as exhibits to our registration statement. After the offering, we will be subject to the reporting requirements of the Securities Exchange Act of 1934. We will fulfill these requirements by filing periodic reports, proxy statements and other information with the SEC. We intend to furnish our stockholders with annual reports containing consolidated financial statements certified by an independent accounting firm. Our SEC filings will be available over the internet at the SEC's website at http://www.sec.gov. You may also read, without charge, or copy, at prescribed rates, any document we file at the SEC's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800- SEC-0330 for more information about the public reference rooms and their copy charges. You may also inspect our SEC reports and other information at Nasdaq's website at http://www.nasdaq.com. 99 INDEX TO FINANCIAL STATEMENTS
Page ---- Nassau Broadcasting Partners, L.P.--Audited Financial Statements Report of Independent Certified Public Accountants..................... F-5 Balance Sheets as of December 31, 1999 and 1998........................ F-6 Statements of Operations and Comprehensive Loss for the years ended December 31, 1999, 1998 and 1997...................................... F-7 Statement of Partners' Capital (Deficit) for the years ended December 31, 1999, 1998 and 1997............................................... F-8 Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997.............................................................. F-9 Notes to Financial Statements.......................................... F-10 Nassau Broadcasting Partners, L.P.--Unaudited Interim Financial Statements Balance Sheets as of March 31, 2000 and December 31, 1999.............. F-24 Statements of Operations and Comprehensive Loss for the three months ended March 31, 2000 and 1999......................................... F-25 Statements of Cash Flows for the three months ended March 31, 2000 and 1999.................................................................. F-26 Notes to Financial Statements.......................................... F-27 Aurora Communications, LLC (A Limited Liability Company)-- Audited Consolidated Financial Statements Report of Independent Auditors......................................... F-31 Consolidated Balance Sheet as of December 31, 1999..................... F-32 Consolidated Statement of Operations for the period from January 20, 1999 (commencement of operations) to December 31, 1999..................... F-33 Consolidated Statement of Members' Capital for the period from January 20, 1999 (commencement of operations) to December 31, 1999............ F-34 Consolidated Statement of Cash Flows for the period from January 20, 1999 (commencement of operations) to December 31, 1999..................... F-35 Notes to Consolidated Financial Statements............................. F-36 Aurora Communications, LLC (A Limited Liability Company)-- Unaudited Interim Financial Statements Condensed Consolidated Balance Sheet as of March 31, 2000.............. F-43 Condensed Consolidated Statement of Operations for the three months ended March 31, 2000.................................................. F-44 Condensed Consolidated Statement of Members' Capital as of March 31, 2000.................................................................. F-45 Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2000.................................................. F-46 Notes to Condensed Consolidated Financial Statements................... F-47 Radio Stations WODE (FM) and WEEX (AM)--Audited Combined Financial Statements Report of Independent Auditors......................................... F-49 Combined Balance Sheets as of December 31, 1999 and 1998............... F-50
F-1
Page ---- Combined Statements of Operations and Net Assets for the year ended December 31, 1999 and the period from January 29, 1998 (commencement of operations) to December 31, 1998......................................... F-51 Combined Statements of Cash Flows for the year ended December 31, 1999 and the period from January 29, 1998 (commencement of operations) to December 31, 1998................................................................. F-52 Notes to Combined Financial Statements.................................... F-53 WEBE and WICC Radio Stations (Divisions of ML Media Partners, L.P.)-- Audited Combined Financial Statements Independent Auditors' Report.............................................. F-58 Combined Balance Sheet as of August 31, 1999.............................. F-59 Combined Statement of Operations and Accumulated Earnings for the period from January 1, 1999 to August 31, 1999.................................. F-60 Combined Statement of Cash Flows for the period from January 1, 1999 to August 31, 1999.......................................................... F-61 Notes to Combined Financial Statements.................................... F-62 WEBE and WICC Radio Stations (Divisions of ML Media Partners, L.P.)-- Audited Combined Financial Statements Independent Auditors' Report.............................................. F-66 Combined Balance Sheets as of December 31, 1998 and 1997.................. F-67 Combined Statements of Operations and Accumulated Earnings (Deficit) for the years ended December 31, 1998, 1997 and 1996......................... F-68 Combined Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996............................................................ F-69 Notes to Combined Financial Statements.................................... F-70 Capstar Trust (A Trust)--Audited Financial Statements Independent Auditors' Report.............................................. F-74 Balance Sheet as of October 26, 1999...................................... F-75 Statement of Operations and Beneficiaries' Equity for the period from January 1, 1999 to October 26, 1999...................................................... F-76 Statement of Cash Flows for the period from January 1, 1999 to October 26, 1999..................................................................... F-77 Notes to Financial Statements............................................. F-78 Capstar Trust (A Trust)--Audited Financial Statements Independent Auditors' Report.............................................. F-82 Balance Sheet as of December 31, 1998..................................... F-83 Statement of Operations and Beneficiaries' Equity for the period from May 29, 1998 (date of inception) to December 31, 1998................................. F-84 Statement of Cash Flows for the period from May 29, 1998 (date of inception) to December 31, 1998.......................................... F-85 Notes to Financial Statements............................................. F-86
F-2
Page ---- Westchester Radio, LLC--Audited Financial Statements Independent Auditors' Report.......................................... F-90 Balance Sheet as of October 26, 1999.................................. F-91 Statement of Operations and Members' Deficiency for the period from January 1, 1999 to October 26, 1999..................................................... F-92 Statement of Cash Flows for the period from January 1, 1999 to October 26, 1999............................................................. F-93 Notes to Financial Statements......................................... F-94 Westchester Radio, LLC--Audited Financial Statements Independent Auditors' Report.......................................... F-101 Balance Sheet as of December 31, 1998................................. F-102 Statement of Operations and Members' Deficiency for the period from April 2, 1998 (date of inception) to December 31, 1998............................. F-103 Statement of Cash Flows for the period from April 2, 1998 (date of inception) to December 31, 1998...................................... F-104 Notes to Financial Statements......................................... F-105 Commodore Media of Westchester, Inc.--Audited Financial Statements Independent Auditors' Report.......................................... F-112 Balance Sheet as of April 1, 1998..................................... F-113 Statement of Operations and Retained Earnings for the period from January 1, 1998 to April 1, 1998..................................... F-114 Statement of Cash Flows for the period from January 1, 1998 to April 1, 1998.............................................................. F-115 Notes to Financial Statements......................................... F-116 Commodore Media of Westchester, Inc.--Audited Financial Statements Independent Auditors' Report.......................................... F-120 Balance Sheet as of December 31, 1997................................. F-121 Statement of Operations and Retained Earnings for the year ended De- cember 31, 1997...................................................... F-122 Statement of Cash Flows for the year ended December 31, 1997.......... F-123 Notes to Financial Statements......................................... F-124 Commodore Media of Westchester, Inc.--Audited Financial Statements Independent Auditors' Report.......................................... F-128 Balance Sheet as of December 31, 1996................................. F-129 Statement of Operations and Accumulated Deficit for the year ended December 31, 1996.................................................... F-130 Statement of Cash Flows for the year ended December 31, 1996.......... F-131 Notes to Financial Statements......................................... F-132
F-3
Page ---- WRKI/WAXB/WPUT/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.)--Audited Combined Financial Statements Independent Auditors' Report......................................... F-145 Combined Balance Sheet as of May 29, 1998............................ F-146 Combined Statement of Operations and Division Equity for the period from January 1, 1998 to May 29, 1998................................ F-147 Combined Statement of Cash Flows for the period from January 1, 1998 to May 29, 1998..................................................... F-148 Notes to Financial Statements........................................ F-149 WRKI/WAXB/WPUT/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.)--Audited Combined Financial Statements Independent Auditors' Report......................................... F-153 Combined Balance Sheet as of December 31, 1997....................... F-154 Combined Statement of Operations and Division Equity for the year ended December 31, 1997............................................. F-155 Combined Statement of Cash Flows for the year ended December 31, 1997................................................................ F-156 Notes to Financial Statements........................................ F-157 WRKI/WAXB/WPUT/WZZN/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.)--Audited Combined Financial Statements Independent Auditors' Report......................................... F-161 Combined Balance Sheet as of December 31, 1996....................... F-162 Combined Statement of Operations and Division Equity for the year ended December 31, 1996............................................. F-163 Combined Statement of Cash Flows for the year ended December 31, 1996................................................................ F-164 Notes to Financial Statements........................................ F-165
F-4 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Partners of Nassau Broadcasting Partners, L.P. We have audited the accompanying balance sheets of Nassau Broadcasting Partners, L.P. as of December 31, 1999 and 1998 and the related statements of operations and comprehensive loss, partners' capital (deficit) and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Nassau Broadcasting Partners, L.P. as of December 31, 1999 and 1998, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. Grant Thornton LLP Edison, New Jersey March 1, 2000 F-5 NASSAU BROADCASTING PARTNERS, L.P. BALANCE SHEETS
December 31, ---------------------------------------- Pro forma 1999 (unaudited) 1999 (See Note O) 1998 ------------ ------------ ------------ ASSETS CURRENT ASSETS Cash and cash equivalents.......... $ 587,362 $ 587,362 $ 7,050,051 Marketable securities.............. 2,201,080 2,201,080 1,779,788 Due from broker.................... -- -- 762,710 Accounts receivable (net of allowance for doubtful accounts of $316,000 and $331,000 in 1999 and 1998, respectively)............... 6,645,514 6,645,514 5,257,065 Prepaid expenses and other current assets............................ 223,664 223,664 206,308 Note receivable--officer........... 590,000 590,000 90,000 ------------ ------------ ------------ Total current assets............. 10,247,620 10,247,620 15,145,922 PROPERTY AND EQUIPMENT, NET.......... 11,792,237 11,792,237 11,316,879 OTHER ASSETS Certificates of deposit-- restricted........................ 77,586 77,586 39,913 Deferred costs..................... 805,436 805,436 1,230,923 Cost in excess of net assets acquired.......................... 26,504,288 26,504,288 27,253,280 Deposits........................... 25,100,484 25,100,484 15,599,133 Note receivable--officer........... 100,000 100,000 36,000 Other assets....................... 140,129 140,129 72,331 ------------ ------------ ------------ $ 74,767,780 $ 74,767,780 $ 70,694,381 ============ ============ ============ LIABILITIES AND PARTNERS' DEFICIT CURRENT LIABILITIES Accounts payable and accrued expenses.......................... $ 1,683,042 $ 1,683,042 $ 1,082,145 Loan payable--broker............... 805,270 805,270 769,846 Mortgages payable--current......... 127,340 127,340 115,824 Capitalized lease obligations-- current........................... 354,057 354,057 320,709 Distribution payable............... 10,500,000 ------------ ------------ ------------ Total current liabilities........ 2,969,709 13,469,709 2,288,524 SENIOR DEBT.......................... 47,938,871 47,938,871 43,994,812 SUBORDINATED NOTES PAYABLE........... 39,099,013 39,099,013 35,091,620 MORTGAGES PAYABLE, LONG-TERM......... 2,099,363 2,099,363 2,226,703 CAPITALIZED LEASE OBLIGATIONS, LONG- TERM................................ 826,376 826,376 1,058,754 DEFERRED INCOME...................... 282,000 282,000 -- DEFERRED GAIN........................ 1,062,000 1,062,000 1,629,000 COMMITMENTS AND CONTINGENCIES PARTNERS' DEFICIT.................... (19,509,552) (30,009,552) (15,595,032) ------------ ------------ ------------ $ 74,767,780 $ 74,767,780 $ 70,694,381 ============ ============ ============
The accompanying notes are an integral part of these statements. F-6 NASSAU BROADCASTING PARTNERS, L.P. STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Year ended December 31, -------------------------------------- 1999 1998 1997 ------------ ----------- ----------- Gross revenues......................... $ 34,295,261 $27,349,044 $20,891,079 Less agency and outside commissions.... 2,893,603 2,352,913 1,811,723 ------------ ----------- ----------- Net revenues....................... 31,401,658 24,996,131 19,079,356 ------------ ----------- ----------- Operating expenses, excluding depreciation, amortization, corporate general and administrative expenses, and local marketing agreement fees.... 20,793,685 17,226,676 13,437,147 Depreciation and amortization expense.. 2,634,479 2,363,711 2,138,981 Corporate general and administrative expenses.............................. 2,280,157 1,825,305 1,995,151 Local marketing agreement fees......... 2,516,718 2,271,176 1,665,990 ------------ ----------- ----------- 28,225,039 23,686,868 19,237,269 ------------ ----------- ----------- Operating income (loss)............ 3,176,619 1,309,263 (157,913) ------------ ----------- ----------- Other income (expenses) Interest and dividend income......... 26,634 65,336 210,709 Realized gains on marketable securities.......................... 2,536,577 926,531 319,269 Gain on sale of radio stations....... 567,000 3,176,496 -- Interest expense..................... (10,946,358) (8,781,184) (6,367,215) Special management fee............... -- -- (744,140) ------------ ----------- ----------- (7,816,147) (4,612,821) (6,581,377) ------------ ----------- ----------- Loss before extraordinary item..... (4,639,528) (3,303,558) (6,739,290) Extraordinary loss on early retirement of debt............................... -- (676,514) -- ------------ ----------- ----------- NET LOSS........................... (4,639,528) (3,980,072) (6,739,290) ------------ ----------- ----------- Unrealized gain on marketable securities Unrealized holding gains arising during the year..................... 1,213,318 488,310 -- Less reclassification adjustment for gains included in net income........ (488,310) -- -- ------------ ----------- ----------- Other comprehensive income............. 725,008 488,310 -- ------------ ----------- ----------- Comprehensive loss................. $ (3,914,520) $(3,491,762) $(6,739,290) ============ =========== ===========
The accompanying notes are an integral part of these statements. F-7 NASSAU BROADCASTING PARTNERS, L.P. STATEMENT OF PARTNERS' CAPITAL (DEFICIT) Years ended December 31, 1997, 1998 and 1999
Accumulated other Total Accumulated comprehensive partners' deficit income deficit ------------ ------------- ------------ Balances, January 1, 1997........... $ (7,792,845) -- $ (7,792,845) Net loss............................ (6,739,290) -- (6,739,290) Increase attributable to subordinated debt option........... 5,500,000 -- 5,500,000 ------------ ---------- ------------ Balances, December 31, 1997......... (9,032,135) -- (9,032,135) Net loss............................ (3,980,072) -- (3,980,072) Unrealized gain on marketable securities......................... -- $ 488,310 488,310 Distributions....................... (3,071,135) -- (3,071,135) ------------ ---------- ------------ Balances, December 31, 1998......... (16,083,342) 488,310 (15,595,032) Net loss............................ (4,639,528) -- (4,639,528) Unrealized gain on marketable securities, net of reclassification adjustment......................... -- 725,008 725,008 ------------ ---------- ------------ Balances, December 31, 1999......... $(20,722,870) $1,213,318 $(19,509,552) ============ ========== ============
The accompanying notes are an integral part of this statement. F-8 NASSAU BROADCASTING PARTNERS, L.P. STATEMENTS OF CASH FLOWS
Year ended December 31, --------------------------------------- 1999 1998 1997 ----------- ------------ ------------ Cash flows from operating activities Net loss............................. $(4,639,528) $ (3,980,072) $ (6,739,290) Adjustments to reconcile net loss to net cash used in operating activities.......................... Extraordinary loss on early retirement of debt................. -- 676,514 -- Depreciation........................ 1,192,000 1,090,478 660,554 Amortization of deferred costs...... 560,487 495,073 755,578 Amortization of subordinated debt discount........................... 901,896 1,100,004 642,000 Amortization of costs in excess of net assets acquired................ 881,992 778,160 722,849 Subordinated debt interest.......... 3,105,497 3,422,028 2,821,432 Deferred senior debt interest....... 1,459,059 494,812 -- Gain on sale of radio stations...... (567,000) (3,176,496) -- Gain on sale of marketable securities......................... (2,536,577) (926,531) (319,269) Changes in operating assets and liabilities Accounts receivable................. (1,388,449) (1,192,491) (940,486) Prepaid expenses and other current assets............................. (17,356) (92,545) (42,406) Prepaid management fee.............. -- 400,000 50,000 Other assets........................ (67,798) (33,499) (207,141) Accounts payable and accrued expenses........................... 600,896 (96,459) (1,004,000) Deferred income..................... 282,000 -- -- ----------- ------------ ------------ Net cash used in operating activities....................... (232,881) (1,041,024) (3,600,179) ----------- ------------ ------------ Cash flows from investing activities Purchase of certificates of deposit--restricted, net........... (37,673) (1,913) (38,000) Purchases of property and equipment.......................... (1,667,364) (911,579) (3,204,608) Acquisition of radio stations....... -- -- (5,052,220) Sale of radio stations, net of selling costs...................... -- 6,778,716 -- Deposits for stations to be acquired and other costs.................... (9,634,351) (4,292,721) (8,769,153) Sale of marketable securities....... 13,684,826 5,623,832 10,458,768 Purchase of marketable securities... (10,081,818) (3,535,043) (11,728,851) Loans to president and officer...... (564,000) (126,000) -- ----------- ------------ ------------ Net cash (used in) provided by investing activities............. (8,300,380) 3,535,292 (18,334,064) ----------- ------------ ------------ Cash flows from financing activities Proceeds from senior debt........... 2,485,000 43,500,000 -- Payment of senior debt.............. -- (25,000,000) -- Payment of subordinated debt ....... -- (9,890,597) -- Proceeds from subordinated debt..... -- -- 17,500,000 Payments of other debt.............. (358,852) (384,499) (377,738) Proceeds from other debt............ 79,424 -- 50,000 Increase in deferred costs.......... (135,000) (1,307,265) -- Distribution to Partners............ -- (3,071,135) -- ----------- ------------ ------------ Net cash provided by financing activities....................... 2,070,572 3,846,504 17,172,262 ----------- ------------ ------------ NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS............. (6,462,689) 6,340,772 (4,761,981) Cash and cash equivalents at beginning of year................... 7,050,051 709,279 5,471,260 ----------- ------------ ------------ Cash and cash equivalents at end of year................................ $ 587,362 $ 7,050,051 $ 709,279 =========== ============ ============ Supplemental disclosures of cash flow information: Cash paid during the year for Interest........................... $ 4,952,226 $ 3,916,497 $ 2,621,972 =========== ============ ============
Supplemental information on noncash investing and financing activities: (1) Capital lease obligations of $1,016,594 and $50,000 were incurred during the years ended December 31, 1998 and 1997, respectively. The Company entered into leases for new broadcast equipment. (2) Mortgage obligations of $2,575,000 were incurred in 1998. The accompanying notes are an integral part of these statements. F-9 NASSAU BROADCASTING PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS NOTE A--SUMMARY OF ACCOUNTING POLICIES 1. Business Nassau Broadcasting Partners, L.P. (the "Company") is principally engaged in the management and operation of radio broadcast stations in suburban markets located between the New York and Philadelphia metropolitan areas. As of December 31, 1999, the Company owns and/or operates nineteen radio stations. Following are descriptions of the partners in the Company and certain affiliates: Nassau Broadcasting Company, Inc. ("NBC")--Limited partner which, on a fully diluted basis, holds a 79% equity interest in the Company. NBC is wholly owned by Nassau Broadcast Holdings, Inc. ("NBH"), in which the Company's President and Chief Executive Officer of the Company, has a 90% interest. The remaining 10% of NBH is owned by the estate of the Chief Executive Officer's father. Nassau Holdings, Inc. ("NHI")--Limited partner, which, on a fully diluted basis, holds a 20% equity interest in the Company. NHI is wholly owned by the President and Chief Executive Officer of the Company. Nassau Broadcasting Partners, Inc. ("NBPI")--General partner which, on a fully diluted basis, holds a 1% equity interest and 100% of the voting rights in the Company. The President and Chief Executive Officer of the Company has a 52.4% equity interest and 33.4% voting interest in NBPI. 2. Revenue Recognition Revenues for commercial broadcasting advertisements are recognized when the commercial is broadcast. 3. Property and Equipment Property and equipment are recorded at cost. Depreciation is provided on a straight-line basis over the estimated useful lives of the related assets. Leasehold improvements are amortized over the shorter of the lease term or estimated useful lives of the assets. Depreciation for tax purposes is based upon the original cost basis of all assets using accelerated methods. 4. Marketable Securities The Company has evaluated its investment policies consistent with Statement of Financial Accounting Standards No. 115 ("SFAS No. 115"), "Accounting for Certain Investments in Debt and Equity Securities," and determined that its investment securities, all of which are equity securities, are to be classified as available-for-sale. Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported as a component of partners' capital. The cost of securities sold is based on the specific identification method. 5. Cost in Excess of Net Assets Acquired The excess of cost over fair value of the net tangible assets acquired consists of FCC licenses and goodwill, which are being amortized by the straight-line method over a period of forty years. Accumulated amortization is $2,468,000 and $1,719,000 at December 31, 1999 and 1998, respectively. F-10 NASSAU BROADCASTING PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS--(Continued) 6. Deferred Costs Deferred costs consist of legal and financing fees incurred in connection with the issuance of the senior and subordinated notes and are being amortized over the terms of the respective debt instruments. 7. Income Taxes The Partnership does not pay income taxes on income; rather, the partners are taxed on their share of partnership income. Accordingly, the Partnership does not make any provisions in its accounts for income taxes. 8. Partners Distribution On August 28, 1998, the Company entered into a senior loan agreement from which a portion of the proceeds was used to repay subordinated notes held by the Company and for distributions to the Company's Partners. 9. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. These funds are insured by the Federal Deposit Insurance Corporation up to an aggregate maximum of $100,000 per institution. At various times throughout the year, the Company maintains cash balances at banks in excess of $100,000. 10. Local Marketing Agreements The Company enters into local marketing agreements ("LMAs") with respect to certain radio stations it intends to acquire. The Company operates the stations under the LMA whereby the Company agrees to purchase from the broadcast station licensee certain broadcast time and provide programming to and sell advertising on the stations during the purchased time. Fees incurred pursuant to various local marketing agreements are recognized as station operating expenses in the period the services received occur. The Company's financial statements include broadcasting revenues and station operating expenses of stations marketed under LMAs. Broadcasting revenues earned pursuant to LMAs are recognized when advertisements are broadcast. Station operating expenses are recognized when goods are received and services are obtained. The broadcast station licensee retains responsibility for ultimate control of the station in accordance with FCC policies. Such control includes, but is not limited to, retaining control over policies, programming, advertisements and operations of the station. When applicable, the LMA terminates upon the closing of the acquisition of the station. The Company operated up to nine stations under such agreements in 1999 and eight stations under such agreements in 1998 and 1997. 11. Impairment of Long Lived Assets and Identifiable Intangibles Intangible assets consist principally of the value of FCC licenses and the excess of the purchase price (including related acquisition costs) over the fair value of net assets of acquired radio stations. These assets are amortized on a straight-line basis over 40 years. The Company continually evaluates the individual performance of all radio stations, including stations that were underperforming when acquired. Intangible assets are evaluated when individual station performance is not meeting the Company's expectations, or if other events or circumstances indicate a possible inability to recover the related intangible assets carrying amount. F-11 NASSAU BROADCASTING PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS--(Continued) Such evaluation is based on various analyses, including identifiable cash flows and profitability projections. If future expected undiscounted cash flows are insufficient to recover the carrying amounts of the asset, then an impairment loss is recognized based upon the excess of the carrying value of the asset over the fair value of such assets, which is based upon the anticipated cash flows on a discounted basis. The Company also evaluates the amortization and depreciation periods of intangibles and other long-lived assets to determine whether events or circumstances warrant revised estimates of useful lives. 12. Barter Transactions Revenue from barter transactions (advertising provided in exchange for goods and services) is recognized as income when commercials are broadcast, and merchandise or services received are charged to expense when received or used. Barter valuation is based upon management's estimates of fair value of goods or services received. Barter revenue was approximately $1,353,000, $1,184,000 and $1,075,000 for the years ended December 31, 1999, 1998 and 1997, respectively. Available barter credits as of December 31, 1999 and 1998 are not material to the Company's financial statements. 13. Concentrations of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments, marketable securities and accounts receivable. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers comprising the Company's customer base. 14. Corporate General and Administrative Expenses Corporate general and administrative expenses consist of corporate overhead costs not specifically allocable to any of the Company's individual stations. 15. Special Management Fee The special management fee incurred in 1997, as approved by the Board of Directors and in accordance with the management consulting agreement with NBH, was in recognition of the successful completion of an acquisition plan initiated in 1995. 16. Comprehensive (Income) Loss Comprehensive income (loss) encompasses net income (loss) and other comprehensive income (loss). The only item of other comprehensive income presently applicable to the Company is the unrealized gain on the fair value of marketable securities available for sale. Where applicable, reclassification adjustments are made for realized gains or losses on such marketable securities that were included in comprehensive income in prior years. 17. Advertising Expenses Costs associated with advertising are expensed as incurred and amounted to approximately $1.4 million, $1.0 million, and $700,000 for the years ended December 31, 1999, 1998 and 1997, respectively. F-12 NASSAU BROADCASTING PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS--(Continued) 18. Certificates of Deposit--Restricted The Company purchased a $75,000 certificate of deposit in April 1999 which secures a standby letter of credit (see Note F-3). The certificate of deposit bears interest at a rate of 4.93% and matures April 2001. The balance at December 31, 1999, including accrued interest, is $77,586. In December 1997, the Company purchased a $38,000 certificate of deposit which secured a standby letter of credit. The letter of credit expired in March 1999, at which time the certificate of deposit was redeemed for approximately $40,000. 19. Deferred Income In 1999, the Company received $350,000 pursuant to an agreement with an advertising representation firm. This amount was recorded as deferred income and is being recognized as a reduction of agency fees over thirty-six months. The amount recognized in 1999 was $68,000. 20. Reclassification Certain prior period amounts have been reclassified to conform to the current period presentation. 21. Significant New Accounting Pronouncements In September 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging Activities," which requires entities to recognize all derivatives in their financial statements as either assets or liabilities measured as fair value. SFAS No. 133 also specifies new methods of accounting for hedging transactions, prescribes the items and transactions that may be hedged and specifies detailed criteria to be met to qualify for hedge accounting. SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal years beginning after June 15, 2000. The Company is evaluating the impact that this statement will have on its results of operations, financial position and related disclosures. In January 2000, the Emerging Issues Task Force ("EITF") reached a consensus on Issue No. 99-17, "Accounting for Advertising Barter Transactions," to be effective for transactions entered into after January 20, 2000. The consensus states that advertising barter transactions should be accounted for at fair value and that the fair value recognized be disclosed in the financial statements, if there is verifiable objective evidence provided by sufficient cash transactions received by the seller of the advertising or similar advertising. EITF No. 99-17 is not expected to have a material effect on the Company's financial statements. 22. Use of Estimates In preparing the Company's financial statements in conformity with accounting principles generally accepted in the United States, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-13 NASSAU BROADCASTING PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS--(Continued) NOTE B--PROPERTY AND EQUIPMENT Property and equipment consisted of the following at December 31, 1999 and 1998:
Depreciable life 1999 1998 ----------------------- ----------- ----------- Broadcast equipment........... 7 years $ 8,805,832 $ 7,868,697 Land and improvements......... 3,566,737 3,500,145 Buildings and improvements.... 10-31.5 years 1,803,423 1,397,643 Office equipment.............. 7 years 670,692 641,519 Computers..................... 5 years 528,094 463,163 Vehicles...................... 3 years 246,545 183,598 Lesser of term of Leasehold improvements........ lease or life of assets 1,193,448 1,100,958 ----------- ----------- 16,814,771 15,155,723 Less accumulated depreciation................. 5,022,534 3,838,844 ----------- ----------- $11,792,237 $11,316,879 =========== ===========
NOTE C--SENIOR DEBT Senior debt represents notes payable to a financial institution in the amounts of $43.5 and $2.485 million. The loans bear interest at 11% current plus 3.25% deferred interest and are collateralized by all of the assets of the Company. In addition, the partners, all of which are corporations, have pledged their corporate stock as a guarantee. All principal and deferred interest are due in full August 28, 2001. The Company has $47 million available pursuant to these agreements, of which $45.985 million has been borrowed. Senior debt payable at December 31, 1999 and 1998 consists of the following:
1999 1998 ----------- ----------- Original proceeds.................................... $43,500,000 $43,500,000 Additional proceeds.................................. 2,485,000 -- Deferred interest.................................... 1,953,871 494,812 ----------- ----------- $47,938,871 $43,994,812 =========== ===========
The term notes require that the Company achieve certain minimum annual net revenues and broadcasting cash flows. The agreements also limit capital expenditures, operating leases, corporate overhead expenses, and certain acquisitions or loans. The Company obtained a waiver, dated February 22, 2000, for the capital expenditure and corporate overhead limitations with which the Company was not in compliance at December 31, 1999. The next compliance date for these covenants is December 31, 2000. F-14 NASSAU BROADCASTING PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS--(Continued) NOTE D--SUBORDINATED DEBT Subordinated debt represents 8% subordinated notes payable to an investor group, due and payable in full, including all accrued interest, on March 27, 2002. The subordinated debt holders have an option to purchase a majority partnership interest. This option can be exercised at any time prior to the expiration of the option on June 30, 2010. Subordinated debt discount in the amount of $5,500,000 has been allocated to the value of the option based on the relative fair values of the underlying debt and the option and is being accreted over the term of the debt. In 1998, a portion of the subordinated debt was repaid thereby giving rise to an extraordinary loss in writing off a pro rata share of the subordinated debt discount. The components of subordinated debt as of December 31, are as follows:
1999 1998 ----------- ----------- Balance at beginning of year, including accrued interest........................................... $38,173,102 $44,641,675 Accrued interest.................................... 3,105,497 3,422,024 ----------- ----------- 41,278,599 48,063,699 Repayment........................................... -- (9,890,597) ----------- ----------- Subordinated debt................................... 41,278,599 38,173,102 ----------- ----------- Subordinated debt discount Original amount................................... 5,500,000 5,500,000 Amortization through end of year.................. (3,320,414) (1,742,004) Write-off attributable to repayment............... -- (676,514) ----------- ----------- 2,179,586 3,081,482 ----------- ----------- Subordinated debt, net of discount.................. $39,099,013 $35,091,620 =========== ===========
NOTE E--MORTGAGES PAYABLE Mortgages payable at December 31, 1999 and 1998 are summarized below:
1999 1998 ---------- ---------- Mortgage payable to a financial institution at 300 basis points per annum in excess of weekly average yield on US Treasury securities, fixed for five years, collateralized by real property, guaranteed by the President of the Company, and due June 1, 2013. Principal and interest are payable monthly............. $1,035,702 $1,078,430 Mortgage payable to seller bearing interest at 10%, collateralized by real property and due February 1, 2008. Principal and interest are payable monthly....... 876,801 944,006 Mortgage payable to sellers bearing interest at 10%, collateralized by real property and due January 23, 2003. Principal and interest are payable monthly. The mortgage was paid in full in February 2000............. 314,200 320,091 ---------- ---------- 2,226,703 2,342,527 Less current maturities................................. 127,340 115,824 ---------- ---------- Mortgages payable--long-term portion.................... $2,099,363 $2,226,703 ========== ==========
F-15 NASSAU BROADCASTING PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS--(Continued) Maturities of mortgages payable as of December 31, 1999 are as follows: 2000.............................................................. $ 127,340 2001.............................................................. 139,842 2002.............................................................. 153,611 2003.............................................................. 168,744 2004.............................................................. 160,905 Thereafter........................................................ 1,476,261 ---------- Total........................................................... $2,226,703 ==========
NOTE F--COMMITMENTS 1. Leases The Company leases office, studio and tower space under noncancellable operating leases expiring through 2018. The Company has an option to renew its corporate office lease for four consecutive five-year periods commencing July 1, 2001. Rent expense for the years ended December 31, 1999, 1998 and 1997 was approximately $610,000, $450,000 and $220,000, respectively. Future minimum lease commitments are as follows: 2000............................................................. $1,021,000 2001............................................................. 986,000 2002............................................................. 783,000 2003............................................................. 770,000 2004............................................................. 766,000 Thereafter....................................................... 4,145,000 ---------- Total minimum lease commitments................................ $8,471,000 ==========
The Company leases certain broadcast equipment under capitalized lease agreements. The cost of leased equipment included in property and equipment was approximately $1,697,000 and $1,675,000 at December 31, 1999 and 1998, respectively, and the accumulated amortization was approximately $530,000 and $330,000 at December 31, 1999 and 1998, respectively. Future minimum lease payments for assets under capital leases at December 31, 1999 are as follows: 2000.............................................................. $ 380,444 2001.............................................................. 302,112 2002.............................................................. 12,405 2003.............................................................. 364,788 2004.............................................................. -- Thereafter........................................................ 467,689 --------- Total minimum lease payments.................................... 1,527,438 Less amount representing interest................................. 347,005 --------- Present value of net minimum lease payments....................... 1,180,433 Less current maturities........................................... 354,057 --------- Long-term obligation.............................................. $ 826,376 =========
NHI and NBC have guaranteed a lease obligation of approximately $500,000. F-16 NASSAU BROADCASTING PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS--(Continued) 2. Stock Option Plan In prior years NBC approved the establishment of a non-statutory stock option plan (the "Plan") that would entitle certain employees of the Company to be eligible for options in NBC. Such Plan is to become effective upon the filing of certain reorganization documents with the FCC, which is expected to occur in March, 2000. The Plan will allow up to 2.5 million options on the common stock of NBC to be given to employees of the Company. Such options will vest and become exercisable upon a liquidating event as defined in the Plan document. The term of the options will not exceed 10 years. As of December 31, 1999, NBC has agreed to grant 2,435,000 options with an exercise price of $.15 per share when FCC approval is obtained. Upon FCC approval of the reorganization documents and the granting of the options, the Company will account for the options pursuant to SFAS 123 and EITF 96-18. In accordance with EITF 96-18, the Company will recognize any cost of the options in reporting periods prior to the measurement date at their lowest aggregate fair value at each of the interim reporting dates prior to the measurement date. 3. Letter of Credit The Company has a $75,000 standby letter of credit, which relates to a payment obligation to a vendor. The standby letter of credit is secured by a certificate of deposit. (Note A-18.) 4. Other The Company has agreed to compensate two officers of the Company a minimum of $425,000 in 2000. In addition, these employees are eligible for bonuses based on results of operations. NOTE G--ACQUISITIONS WOBM (FM) and WOBM (AM) On July 1, 1996, the Company entered into an agreement to purchase all of the issued and outstanding capital stock of Seashore Broadcasting Inc. and Northshore Broadcasting Inc. ("Seashore") for $21 million, of which approximately $5 million relates to the LMA. Seashore owns and operates WOBM (FM) and WOBM (AM) located in the Toms River area in New Jersey. The Company paid an irrevocable, nonrefundable deposit of $2 million and final closing is scheduled for July 1, 2000, pending FCC approval. In a related transaction, the Company entered into an LMA effective July 1, 1996 with Seashore pursuant to which the Company programs all of the broadcast time of the stations and sells all of the commercial time during its programming. Accordingly, the Company's financial statements include the broadcasting revenues and station operating expenses of WOBM (FM) and WOBM (AM). The Company has agreed to make monthly LMA payments of $83,333, increasing in annual increments to maximum monthly payments of $108,333, through the later of June 30, 2000 or the closing, and reimburse certain operating expenses incurred during the term of the agreement. The agreement expires on closing. F-17 NASSAU BROADCASTING PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS--(Continued) WSUS (FM) On May 30, 1997, the Company acquired substantially all of the net operating assets of WSUS Communications, Inc., which operated one radio station, WSUS (FM), located in Franklin, New Jersey, for a purchase price of approximately $5 million. The above acquisition has been accounted for by the purchase method of accounting. The purchase price has been allocated to the assets acquired, principally intangible assets, and the liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the purchase price over the estimated fair value of the net assets acquired has been recorded as costs in excess of net assets acquired. The operating results of this acquisition are included in the Company's results of operations from the date of acquisition. Pro forma results of operations have not been included as the amounts are not material to the Company's financial statements. WNJO (FM) and WCHR (AM) On June 1, 1996, the Company entered into an agreement, as amended, with Great Scott Broadcasting ("Great Scott") to purchase substantially all of the assets of WNJO (FM) and WCHR (AM), located in the Trenton, New Jersey area, for a purchase price of $20,000,000. At December 31, 1999, the entire purchase price had been paid and is reflected as deposits on the balance sheet. The FCC has not yet approved the transaction. If the FCC fails to approve the transaction and the Company is unsuccessful in appealing that decision, the stations would be remarketed for a period of three years. Depending upon the ultimate sales price to a third-party purchaser, the Company may or may not be made whole in recovering its deposits. Concurrently, the Company entered into an LMA with Great Scott pursuant to which the Company has the right to program all of the broadcast time of the stations and sell all of the commercial time during its programming beginning June 1, 1997. The Company pays $75,000 per month pursuant to this agreement. Effective February 8, 1999, the $75,000 per month payment was applied to the final payment due under the Asset Purchase Agreement. These payments are included in deposits on the accompanying balance sheet. Upon a reduction of the payments pursuant to the LMA agreement in September 1999, the Company continues to recognize revenues and expenses in accordance with the terms of the LMA, and has commenced amortizing the deposits on these stations over a period of 25 years. The amount amortized in 1999 was approximately $130,000. WTSX (FM) and WDLC (AM) On August 7, 1998, the Company entered into an option agreement to acquire the assets of Port Jervis Broadcasting Co., Inc. ("Port Jervis"), which operates WTSX (FM) and WDLC (AM), licensed to broadcast in Port Jervis, New York, for a purchase price of approximately $2,700,000. The option agreement calls for an option payment of $550,000 plus monthly option payments of $12,500 and extends for a period of 36 months. Concurrently, the Company entered into an LMA with Port Jervis for the operation of the stations requiring monthly payments ranging from $10,000 at the outset to $25,000 commencing August 1, 2000. F-18 NASSAU BROADCASTING PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS--(Continued) WILT (AM) In 1998, NBH submitted a Chapter 11 Plan of Reorganization for Tiab Communications Corporation which owns the FCC license for WILT (AM) in Mt. Pocono, Pennsylvania. An agreement between NBH and the Company provides that in exchange for the funding of the bankruptcy plan and associated legal costs, the Company has received an option to purchase TIAB or the FCC license from NBH for a nominal amount. On February 12, 1999, the Plan of Reorganization was confirmed and funded by the Company in the amount of $110,000. At December 31, 1999, WILT (AM) was not yet on the air and all amounts disbursed to date are reflected as deposits on the accompanying balance sheet. WJHR (AM) On January 21, 1999, the Company entered into an agreement to purchase all of the assets of WJHR-AM in Flemington, New Jersey for $2,500,000. Final closing is scheduled for November 18, 2001. Concurrent with this transaction, the Company entered into an LMA for the operation of the radio station until November 18, 2001. The agreement calls for quarterly payments of $50,000 for the term of the agreement. WCHR (FM) On August 18, 1999, the Company exercised its option to purchase for $4,675,000 the stock of a corporation which owns the permit to construct an FM radio station in Ocean County, New Jersey. The Company has paid approximately $2.0 million of the purchase price as of the balance sheet date, of which approximately $1.7 million is nonrefundable. Such amounts have been included in deposits on the accompanying balance sheet. The closing of this acquisition is pending FCC approval. NOTE H--OTHER LOCAL MARKETING AGREEMENTS On November 12, 1998, the Company sold all of the assets associated with WSBG (FM) and WVPO (AM) in Stroudsburg, Pennsylvania for approximately $6.8 million. Concurrent with that transaction, the Company entered into an LMA for its operation of the stations for a period of 36 months. The agreement requires the Company to make quarterly payments in the amount of $175,000, which are recorded as operating expenses of the radio stations. The Company has accounted for these transactions as a sale-leaseback arrangement whereby $1,700,000 of the gain on sale of the radio stations is being deferred and credited to gain on sale of radio stations over the thirty-six months of that agreement. The deferred gain recognized in 1999 and 1998 was $567,000 and $71,000, respectively. NOTE I--MARKETABLE SECURITIES The following is a summary of marketable securities at December 31:
1999 1998 ---------- ---------- Equity securities: Fair value........................................... $2,201,080 $1,779,788 Cost................................................. 987,762 1,291,478 ---------- ---------- Unrealized gain.................................... $1,213,318 $ 488,310 ========== ==========
F-19 NASSAU BROADCASTING PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS--(Continued) At December 31, 1999 and 1998, the Company had loans from its broker totaling $805,270 and $769,846, respectively. At December 31, 1999 and 1998, the interest rate on the loans was 8.5% and 7.75%, respectively. The loans are secured by the Company's marketable securities in the Company's investment account. NOTE J--SEGMENT INFORMATION The Company manages and operates radio stations in the New York and Philadelphia metropolitan areas. The Company considers its business to consist of one reportable operating segment, based on radio stations operated, sharing similar economic characteristics in the nature of the advertising sold, method of broadcasting and listener base. All the Company's revenue is earned within the Northeastern United States. NOTE K--RELATED PARTY TRANSACTIONS Certain investors in NBPI have purchased from the principal shareholder in the majority partner, NBC ("Grantor"), an option to purchase a majority partnership interest. The option is exercisable at any time at an exercise price of $500,000 and expires June 10, 2010. The investors have the right to require the Grantor to repurchase the unexercised option units upon the sale, transfer, assignment or other disposition of all or substantially all of the Company's assets. The repurchase price of the unexercised option units varies based on terms specified in the partnership agreement. In 1997, a special management fee of $744,140 was paid to NBH, as approved by the Company's partners. On January 23, 1998, NBH purchased twenty-five percent of the stock of a corporation which owns an AM radio station license. In the same transaction, NBH also acquired the real estate and broadcasting towers of the AM station and an FM station. On February 1, 1998, NBH assigned, at cost, all rights and title under the aforementioned transaction to the Company. In 1996, the Company advanced $450,000 to NBH as a prepayment of a then existing consulting agreement. $50,000 of the prepayment was expensed in 1997, with the remaining $400,000 being repaid to the Company in 1998 upon termination of the consulting agreement. In 1998, the Company acquired a parcel of real property for approximately $1 million that was owned by a partnership in which the president of the Company was a partner. At December 31, 1999 and 1998, the President and Chief Executive Officer of the Company was indebted to the Company in the amount of $590,000 and $90,000, respectively. These amounts bear interest at the rate of 8% and were repaid in full, with interest, in February 2000 and March 1999, respectively. At December 31, 1999 and 1998, the Company had notes receivable from an officer totaling $100,000 and $36,000, respectively, which bear interest at 8% per annum. Principal and interest are due in full on November 30, 2001. F-20 NASSAU BROADCASTING PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS--(Continued) NOTE L--EMPLOYEE BENEFIT PLAN The Company maintains a defined contribution plan covering all employees who have one year of service and are age twenty-one or older. Under the provisions of the plan, the Company matches 25% of the first 8% of the participant's compensation contributed as elective deferrals. The Company's contribution in 1999, 1998 and 1997 amounted to $100,706, $76,497 and $87,350, respectively. NOTE M--ACCOUNTS PAYABLE AND ACCRUED EXPENSE Accounts payable and accrued expenses consist of the following at December 31,
1999 1998 ---------- ---------- Accounts payable...................................... $ 767,519 $ 644,020 Accrued commissions................................... 281,875 268,891 Accrued interest...................................... 435,580 -- Other accrued expenses................................ 198,068 169,234 ---------- ---------- $1,683,042 $1,082,145 ========== ==========
NOTE N--FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosures About Fair Value of Financial Instruments," requires that the Company disclose estimated fair values for its financial instruments. The following summary presents a description of the methodologies and assumptions used to determine such amounts: Limitations Fair value estimates are made at a specific point in time and are based on relevant market information and information about the financial instruments; they are subjective in nature and involve uncertainties and matters of judgment, and, therefore, cannot be determined with precision. These estimates do not reflect any premium or discounts that could result from offering for sale at one time the Company's entire holdings of a particular instrument. Changes in assumptions could significantly affect these estimates. Since the fair value is estimated as of December 31, 1999 and 1998, the amounts that will actually be realized or paid at settlement or maturity of the instruments could be significantly different. Cash Equivalents and Certificates of Deposit The carrying amount is assumed to be the fair value because of the liquidity of the instruments. Marketable Securities The carrying amount represents fair value based on quoted market price. F-21 NASSAU BROADCASTING PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS--(Continued) Accounts Receivable and Notes Receivable The carrying amount is assumed to be the fair value because of the short- term maturity of the portfolio. The carrying amount of the noncurrent note receivable is assumed to be the fair value because the note receivable earns interest at prevailing rates. Long-term Obligations The fair values of the Company's notes payable, mortgages payable, senior debt and other long-term obligations approximate the terms in the marketplace at which they could be replaced in the aggregate. Therefore, the fair value approximates the carrying value of these financial instruments in the aggregate. NOTE O--SUBSEQUENT EVENTS On February 24, 2000, the Company sold its tower related broadcasting assets and real property to affiliated entities controlled by the Company's President and Chief Executive Officer for $10.0 million. These affiliated entities then immediately sold the bulk of these assets to a third party, who has leased tower space back to the Company. On February 29, 2000, the Company entered into an asset purchase agreement with Clear Channel Communications Inc. ("Clear Channel") to purchase two Allentown, Pennsylvania stations for total consideration of $30 million payable in cash. In March 2000, the Company has irrevocably deposited $6 million toward the purchase of these stations. Unaudited On March 24, 2000, the Company entered into a purchase and exchange agreement with the owners of Aurora Communications, LLC ("Aurora") to purchase all of their stock, and thereby acquire the nine stations owned by Aurora for total consideration of $185 million, consisting of $35 million in common stock of the Company, $85 million in cash and $65 million in assumption of debt. The cash amount is subject to a working capital adjustment. In March 2000, the Company irrevocably deposited $7 million toward the purchase of Aurora. On March 1, 2000, the Company entered into an additional $10 million term loan agreement with its Senior Lender. The proceeds from this loan were used for deposits on the Aurora and Clear Channel acquisitions. The Company's equity investors have committed financing for the Aurora and Clearview Channel acquisitions. The Company intends to conduct an initial public offering ("IPO") for a yet to be determined number of shares of Class A common stock. Prior to the IPO, the Company plans to issue $60 million aggregate principal of senior discount notes due 2010. The Company has also entered into a commitment letter with a lender for the arrangement of senior credit facilities in an amount of up to $144 million. There is no assurance that these transactions will occur, or that they will occur under the terms and amounts noted above. Prior to the consummation of the IPO, the Company intends to convert to a corporation, which will result in the Company being subject to Federal, state and local corporate income taxes. F-22 NASSAU BROADCASTING PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS--(Continued) In connection with the transactions discussed above, the President and Chief Executive Officer of the Company is eligible to receive $7.5 million for a redemption of a partial equity interest as well as receive approximately $3 million as a distribution in accordance with the terms of the Company's partnership agreement. These distributions will be paid out of the revolving credit facility. The accompanying pro forma balance sheet reflects the partial equity redemption and distribution as if they occurred on December 31, 1999. Certain marketable equity securities held by the Company as of December 31, 1999 declined by approximately $800,000 as of April 25, 2000. Management of the Company believes this decline to be temporary. F-23 NASSAU BROADCASTING PARTNERS, L.P. BALANCE SHEETS
March 31, December 2000 31, 1999 ----------- ----------- (unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents.......................... $ 2,396,819 $ 587,362 Marketable securities.............................. 2,099,734 2,201,080 Accounts receivable (net of allowance for doubtful accounts of $353,000 and $316,000 in 2000 and 1999, respectively)............................... 5,456,265 6,645,514 Prepaid expenses and other current assets.......... 450,848 223,664 Due from officer................................... 201,306 590,000 ----------- ----------- Total current assets............................. 10,604,972 10,247,620 PROPERTY AND EQUIPMENT, NET.......................... 5,672,422 11,792,237 OTHER ASSETS Certificates of deposit-restricted -- 77,586 Deferred costs..................................... 1,039,596 805,436 Cost in excess of net assets acquired.............. 26,317,040 26,504,288 Deposits........................................... 38,902,228 25,100,484 Note receivable-officer............................ 100,000 100,000 Other assets....................................... 50,250 140,129 ----------- ----------- $82,686,508 $74,767,780 =========== =========== LIABILITIES AND PARTNERS' DEFICIT CURRENT LIABILITIES Accounts payable and accrued expenses.............. $ 1,705,265 $ 1,683,041 Loan payable-broker................................ -- 805,270 Mortgages payable-current.......................... -- 127,341 Capitalized lease obligations-current.............. 471,665 354,057 ----------- ----------- Total current liabilities........................ 2,176,930 2,969,709 SENIOR DEBT.......................................... 56,138,603 47,938,871 SUBORDINATED NOTES PAYABLE........................... 40,159,232 39,099,013 MORTGAGES PAYABLE, LONG-TERM......................... 2,099,363 CAPITALIZED LEASE OBLIGATIONS, LONG-TERM............. 642,484 826,376 DEFERRED INCOME...................................... 252,834 282,000 DEFERRED GAIN........................................ 4,805,250 1,062,000 COMMITMENTS AND CONTINGENCIES PARTNERS' DEFICIT.................................... (21,488,825) (19,509,552) ----------- ----------- $82,686,508 $74,767,780 =========== ===========
The accompanying notes are an integral part of these statements. F-24 NASSAU BROADCASTING PARTNERS, L.P. STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Three months ended March 31, ------------------------ 2000 1999 ----------- ----------- (unaudited) Gross revenues....................................... $ 7,893,311 $ 6,810,687 Less agency and outside commissions.................. 611,533 543,884 ----------- ----------- Net revenues..................................... 7,281,778 6,266,803 ----------- ----------- Operating expenses, excluding depreciation, amortization, corporate general and administrative expenses, and local marketing agreement fees........ 5,318,209 4,569,762 Depreciation and amortization expense................ 822,093 602,832 Corporate general and administrative expenses........ 587,050 500,435 Local marketing agreement fees....................... 639,571 725,261 ----------- ----------- 7,366,923 6,398,290 ----------- ----------- Operating loss................................... (85,145) (131,487) ----------- ----------- Other income (expense) Interest and dividend income....................... 11,099 -- Realized gains on marketable securities............ 441,457 153,665 Gain on sale of radio stations and tower assets.... 1,632,536 141,750 Interest expense................................... (3,024,268) (2,718,400) ----------- ----------- (939,176) (2,422,985) ----------- ----------- NET LOSS......................................... (1,024,321) (2,554,472) ----------- ----------- Unrealized gain on marketable securities Unrealized holding losses arising during the period............................................ (513,495) (335,332) Less reclassification adjustment for gains included in net income..................................... (441,457) (153,665) ----------- ----------- Other comprehensive loss............................. (954,952) (488,997) ----------- ----------- Comprehensive loss............................... $(1,979,273) $(3,043,469) =========== ===========
The accompanying notes are an integral part of these statements. F-25 NASSAU BROADCASTING PARTNERS, L.P. STATEMENTS OF CASH FLOWS
Three months ended March 31, ------------------------- 2000 1999 ------------ ----------- (unaudited) Cash flows from operating activities Net loss.......................................... $ (1,024,321) $(2,554,472) Adjustments to reconcile net loss to net cash provided by operating activities Depreciation and amortization.................... 320,725 301,464 Amortization of deferred costs................... 114,120 114,120 Amortization of subordinated debt discount....... 225,474 275,001 Amortization of costs in excess of net assets acquired........................................ 387,248 187,248 Subordinated debt interest....................... 834,745 772,648 Deferred senior debt interest.................... 377,779 353,438 Gain on sale of radio stations and tower assets.. (1,632,536) (141,750) Gain on sale of securities....................... (441,457) (153,665) Changes in operating assets and liabilities...... Accounts receivable............................. 1,189,249 714,025 Prepaid expenses and other current assets....... (227,184) (196,767) Other assets.................................... (89,969) 12,863 Accounts payable and accrued expenses........... 22,224 433,041 Deferred income................................. (29,166) -- ------------ ----------- Net cash provided by operating activities...... 26,931 117,194 ------------ ----------- Cash flows from investing activities Purchases of property and equipment............... (234,614) (178,260) Sale of tower assets.............................. 9,890,000 -- Deposits for radio stations to be acquired and other costs...................................... (14,123,021) (4,596,260) Sale of marketable securities..................... 951,918 6,465,487 Purchase of marketable securities................. (1,359,581) (8,595,610) Payments received on due from officer, net........ 388,694 -- ------------ ----------- Net cash used in investing activities.......... (4,486,604) (6,904,643) ------------ ----------- Cash flows from financing activities Proceeds from senior debt......................... 7,821,955 -- Proceeds of other debt............................ -- 585,704 Principal payments of other debt.................. (1,204,815) -- Increase in deferred costs........................ (348,280) (50,000) ------------ ----------- Net cash provided by financing activities...... 6,268,860 535,704 ------------ ----------- NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS................................... 1,809,187 (6,251,745) Cash and equivalents at beginning of period......... 587,632 7,050,051 ------------ ----------- Cash and equivalents at end of period............... $ 2,396,819 $ 798,306 ============ ===========
The accompanying notes are an integral part of these statements. F-26 NASSAU BROADCASTING PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS March 31, 2000 and 1999 NOTE A--GENERAL In the opinion of management, the accompanying unaudited financial statements contain all adjustments necessary to present fairly Nassau Broadcasting Partners, L.P.'s (the "Company") financial position at March 31, 2000 and the results of operations and cash flows for the three months ended March 31, 2000 and 1999. Certain financial information which is normally included in financial statements prepared in accordance with generally accepted accounting principles, but which is not required for interim reporting purposes, has been condensed or omitted. The accompanying financial statements need to be read in conjunction with the financial statements and notes thereto included elsewhere in this prospectus. Any adjustments that have been made to the financial statements are of a normal recurring nature. Significant New Accounting Pronouncements In September 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging Activities," which requires entities to recognize all derivatives in their financial statements as either assets or liabilities measured as fair value. SFAS No. 133 also specifies new methods of accounting for hedging transactions, prescribes the items and transactions that may be hedged and specifies detailed criteria to be met to qualify for hedge accounting. SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal years beginning after June 15, 2000. The Company is evaluating the impact that this statement will have on its results of operations, financial position and related disclosures. In January 2000, the Emerging Issues Task Force ("EITF") reached a consensus on Issue No. 99-17, "Accounting for Advertising Barter Transactions," to be effective for transactions entered into after January 20, 2000. The consensus states that advertising barter transactions should be accounted for at fair value and that the fair value recognized be disclosed in the financial statements, if there is verifiable objective evidence provided by sufficient cash transactions received by the seller of the advertising or similar advertising. Adoption of EITF No. 99-17 did not have a material effect on the Company's financial statements. NOTE B--RELATED PARTY TRANSACTIONS On February 24, 2000, the Company sold its tower-related broadcasting assets and real property, net of liabilities to Nassau Tower Holdings, LLC ("NTH"), an entity controlled by the Company's President and Chief Executive Officer for $10 million. This affiliated entity then immediately sold the bulk of these assets to a third party. In connection with the above transaction, the Company entered leases for tower space with NTH for certain assets the Company sold to NTH. In addition, the Company is also leasing tower space from the third party who purchased the assets from NTH. The Company paid approximately $20,000 rent to NTH for the three months ended March 31, 2000. The initial terms of the leases are for ten years with options to renew for four consecutive five-year periods. For the portion of the assets not leased back, the Company has recorded a gain of $1,475,870. In F-27 NASSAU BROADCASTING PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS--(Continued) March 31, 2000 and 1999 addition, a portion of the assets have been accounted for as sales leaseback arrangements and accordingly, the gain, approximately which amounted to $1.8 million, has been deferred and will be amortized over the lease terms. The remainder of the realized gain which amounted to approximately $2.1 million, will be recognized when the Company fulfills its obligations. The gain recognized on the sales lease back assets was $15,000 for the three months ended March 31, 2000. During the first quarter of 2000, the Company advanced its President and Chief Executive Officer approximately $200,000. This advance, which was noninterest-bearing, was repaid in full in May 2000. NOTE C--ACQUISITIONS AND DISPOSITION On February 29, 2000, the Company entered into an asset purchase agreement with Clear Channel Communications Inc. ("Clear Channel") to purchase two Allentown, Pennsylvania, stations for total consideration of $30 million payable in cash. In March 2000, the Company deposited $6 million toward the purchase of these stations. On March 24, 2000, the Company entered into a purchase and exchange agreement with the owners of Aurora Communications, LLC ("Aurora") to purchase all of their stock, and thereby acquire the nine stations owned by Aurora for total consideration of $185 million, consisting of $35 million in common stock of the Company, $85 million in cash and $65 million in assumption of debt. The cash amount is subject to a working capital adjustment. In March 2000, the Company deposited $7 million toward the purchase of Aurora. NOTE D--SENIOR AND OTHER DEBT Senior Debt On March 1, 2000, the Company entered into an additional $10 million term loan agreement with its Senior Lender. The proceeds from this loan were used for deposits on the Aurora and Clear Channel acquisitions. The loan bears interest at the rate of 11% current plus 3.25% deferred interest. All principal and deferred interest are due in full on August 28, 2001. In connection with the loan, the Company paid approximately $348,000 in financing costs, which were deferred and are being amortized over the term of the loan. Mortgage Payable In connection with the Tower sale, NTH assumed certain mortgage obligations of the Company. NOTE E--STOCK OPTION PLAN AND EMPLOYEE STOCK PURCHASE PLAN Stock Option Plan: In prior years NBC approved the establishment of a non-statutory stock option plan (the "Plan") that would entitle certain employees of the Company to be eligible for options in NBC. Such Plan became effective upon the filing of certain reorganization documents with the FCC, which occurred in March, 2000. The Plan allows up to approximately 2.5 million options on the common stock of NBC to be given to employees of the F-28 NASSAU BROADCASTING PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS--(Continued) March 31, 2000 and 1999 Company. Such options will vest and become exercisable upon a liquidating event as defined in the Plan document. The term of the options will not exceed 10 years. In April, 2000, the Company received FCC approval of the reorganization documents and NBC granted 2,435,000 options to employees of the Company, with an exercise price of 15c. NBC intends to cancel the Plan and options in June, 2000 prior to the measurement date. Upon cancellation of the NBC option plan the Company intends to establish an option plan and replace the cancelled NBC options with options of the Partnership (50,000 units). The number of options, exercise price and terms will effectively be the same as the NBC, except that the options will be fully vested and exercisable upon grant. The options granted by the Company will be accounted for pursuant to APB No. 25. Management estimates that the compensation expense to be recorded at the time of grant will range between $4 to $5 million. After the company converts to a corporation, the Company will cancel the options in the partnership and issue new options with identical terms and equivalent equity interests as the options for the partnership. Total shares to be issued is expected to be approximately 309,317 options. These options will be included in the Company's stock incentive plan. The Company's Stock incentive plan will allow the company to issue up to 2 million shares of Class A common stock. The exercise price will be determined at the time the options are granted. The options will be exercisable at the times and upon the conditions that are applicable for the option agreement. The Company expects to issue 1,010,000 options in connection with the completion of the contemplated initial public offering exercisable at the offering price of the offering Employee Stock Purchase Plan The Company intends to adopt an employee stock purchase plan which would allow eligible employees to purchase shares up to 20% of an employee's compensation for each payroll period. The total shares available under the plan will be 2 million shares. The purchase price will be 85% of the fair value at the beginning of each offering period or the end of each purchase period within the offering period, whichever price is lower. The plan provides for a series of consecutive, overlapping offering periods that will generally be 24 months long. NOTE F--SUBSEQUENT EVENTS Senior Credit Facility In May 2000, the Company entered into a senior credit facility for approximately $144 million. The credit facility consists of the following: $33.0 million A1 term loan, which will finance a portion of the purchase price of Aurora Communications in the form of repayment of debt of Aurora Communications. This loan will amortize on a quarterly basis and matures on June, 2006. $26.0 million A2 term loan, $5 million of which will be used to repay part of current senior credit facilities and the remainder of which will finance part of the purchase price of stations we currently operate under local marketing agreements. This loan will amortize on a quarterly basis and matures on June, 2006. $40.0 million B term loan, which will be used to repay borrowings under the current senior credit facility and fund an equity redemption. This loan will have minimal amortization over its life and matures on June, 2007, at which time a balloon payment will be due. F-29 NASSAU BROADCASTING PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS--(Continued) March 31, 2000 and 1999 $25.0 million C term loan, which will pay part of the purchase price of Aurora Communications in the form of repayment of debt of Aurora Communications. This loan will have minimal amortization over its life and matures on June, 2008, at which time a balloon payment will be due. $20.0 million revolving credit facility, of which the Company has drawn $4.6 million to date, which matures on June, 2006. All of the above loans bear interest at an alternative base rate or LIBOR, as more fully described in the Senior Credit Facility Agreement. The credit facility contains events of default typical for these types of facilities (subject in each case to certain grace periods and materiality thresholds), including, without limitation, (i) nonpayment of amounts under the credit facility, (ii) material misrepresentations, (iii) covenant defaults, (iv) cross-defaults to their indebtedness, (v) judgment defaults, (vi) bankruptcy and (vii) a change of control. Senior Discount Notes In May 2000, the Company issued $60.0 million aggregate principal amount of 13% senior discount notes due 2010, along with limited partnership units in the Company to several institutions. In May 2000, the Company repaid $58.0 million in then-outstanding borrowings under its current senior secured credit facility from borrowings under the new credit facility and from proceeds of the senior discount notes. Subordinated Notes, Preferred Distribution and Redemption of Equity Interest In May 2000, the Company repaid all outstanding subordinated notes payable, which amounted to $42.4 million, and made a preferred distribution to the President and Chief Executive Officer of the Company under the partnership agreement, in an amount of $2.9 million. In addition, the Company's President and Chief Executive Officer is eligible to receive $7.5 million for a redemption of a partial equity interest, of which he has received $2.5 million. The Company intends to conduct an initial public offering ("IPO") for a yet to be determined number of shares of Class A common stock. There is no assurance that this transaction will occur. Prior to the consummation of the IPO, the Company intends to convert to a corporation, which will result in the Company being subject to Federal, state and local corporate income taxes. F-30 REPORT OF INDEPENDENT AUDITORS The Members Aurora Communications, LLC We have audited the accompanying consolidated balance sheet of Aurora Communications, LLC as of December 31, 1999, and the related consolidated statements of operations, members' capital and cash flows for the period January 20, 1999 (commencement of operations) to December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Aurora Communications, LLC at December 31, 1999 and the consolidated results of its operations and its cash flows for the period January 20, 1999 (commencement of operations) to December 31, 1999, in conformity with accounting principles generally accepted in the United States. Ernst & Young LLP New York, New York February 25, 2000 F-31 AURORA COMMUNICATIONS, LLC (A Limited Liability Company) CONSOLIDATED BALANCE SHEET December 31, 1999 ASSETS Current assets: Cash and cash equivalents..................................... $ 1,096,594 Accounts receivable, less allowance for doubtful accounts of $43,789...................................................... 3,694,071 Prepaid expenses and other current assets..................... 164,477 ------------ Total current assets........................................ 4,955,142 Property and equipment, at cost, less accumulated depreciation of $157,829.................................................... 5,713,402 FCC licenses and goodwill, net of accumulated amortization of $666,779....................................................... 92,012,735 Deferred financing costs, net of accumulated amortization of $119,772....................................................... 2,179,283 ------------ Total assets................................................ $104,860,562 ============ LIABILITIES AND MEMBERS' CAPITAL Current liabilities: Accounts payable and accrued expenses......................... $ 1,105,550 Accrued wages and sales commissions........................... 277,897 Accrued interest payable...................................... 807,359 ------------ Total current liabilities................................... 2,190,806 Long-term debt.................................................. 64,256,250 Other noncurrent liabilities.................................... 383,005 Commitments and contingencies................................... -- Members' capital: Members interests............................................. 38,605,270 Accumulated deficit........................................... (574,769) ------------ Total members' capital...................................... 38,030,501 ------------ Total liabilities and members' capital...................... $104,860,562 ============
See accompanying notes. F-32 AURORA COMMUNICATIONS, LLC (A Limited Liability Company) CONSOLIDATED STATEMENT OF OPERATIONS For the period January 20, 1999 (commencement of operations) to December 31, 1999 Net revenues....................................................... $6,204,731 Operating expenses: Selling.......................................................... 1,111,258 Programming and promotion........................................ 1,198,369 Technical........................................................ 113,594 General and administrative....................................... 682,963 Depreciation and amortization.................................... 824,608 Corporate expenses............................................... 743,766 ---------- Total operating expenses....................................... 4,674,558 ---------- Operating income................................................... 1,530,173 Interest income.................................................... 32,345 Interest expense................................................... 2,137,287 ---------- Net loss........................................................... $ (574,769) ==========
See accompanying notes. F-33 AURORA COMMUNICATIONS, LLC (A Limited Liability Company) CONSOLIDATED STATEMENT OF MEMBERS' CAPITAL
Total Preferred Units Common Units Additional --------------------- --------------- Paid-in Accumulated Units Value Units Value Capital Deficit Total --------- ----------- --------- ----- ---------- ----------- ----------- Balance at January 20, 1999................... -- $ -- -- $ -- $ -- $ -- $ -- Issued in connection with May 3, 1999 capitalization......... 52,500 525,000 2,743,678 -- -- -- 525,000 Issued in connection with August 31, 1999 capitalization......... 3,807,500 38,075,000 1,898,572 -- -- -- 38,075,000 Other issuance.......... -- -- -- -- 5,270 5,270 Net loss................ -- -- -- -- -- (574,769) (574,769) --------- ----------- --------- ----- ------ --------- ----------- Balance at December 31, 1999................... 3,860,000 $38,600,000 4,642,250 $ -- $5,270 $(574,769) $38,030,501 ========= =========== ========= ===== ====== ========= ===========
See accompanying notes. F-34 AURORA COMMUNICATIONS, LLC (A Limited Liability Company) CONSOLIDATED STATEMENT OF CASH FLOWS For the period January 20, 1999 (commencement of operations) to December 31, 1999 Cash flows from operating activities Net loss......................................................... $ (574,769) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization.................................. 824,608 Non-cash interest expense...................................... 502,777 Non-cash compensation expense.................................. 5,270 Changes in current assets and current liabilities: Increase in accounts receivable.............................. (3,694,071) Increase in prepaid expenses and other current assets........ (164,477) Increase in accounts payable and accrued expenses............ 1,105,550 Increase in accrued wages and sales commissions.............. 277,897 Increase in accrued interest payable......................... 807,359 ----------- Total adjustments............................................ (335,087) ----------- Net cash used in operating activities............................ (909,856) ----------- Cash flows from investing activities Payments for business acquisitions............................... (98,343,310) Capital expenditures............................................. (207,435) ----------- Net cash used in investing activities............................ (98,550,745) ----------- Cash flows from financing activities Proceeds from issuance of long-term debt, net.................... 64,256,250 Proceeds from issuance of membership interests................... 38,600,000 Debt issuance costs.............................................. (2,299,055) ----------- Net cash provided by financing activities........................ 100,557,195 ----------- Net increase in cash and cash equivalents........................ 1,096,594 Cash and cash equivalents at beginning of period................. -- ----------- Cash and cash equivalents at end of period....................... $ 1,096,594 ===========
See accompanying notes. F-35 AURORA COMMUNICATIONS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1999 1. Nature of Business and Organization Aurora Communications, LLC (the "Company") is a limited liability company formed in January 1999 and is engaged in the acquisition and operation of radio stations throughout the United States. The Company is a subsidiary of Aurora Management, Inc., its majority owner and managing member. Pursuant to its limited liability company agreement, the Company shall continue until the earlier of its dissolution by its members or December 31, 2049. 2. Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany items and transactions have been eliminated. Depreciation Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets, as follows: Buildings......................................................... 39 years Furniture and fixtures............................................ 5-7 years Broadcasting equipment............................................ 3-15 years Transportation equipment.......................................... 5 years
Expenditures for maintenance and repairs are charged to operations as incurred. Intangible Assets Deferred financing costs of $2.2 million are amortized over the term of the related debt on a straight-line basis, which approximates the interest method. FCC licenses and goodwill, in the amount of $92.0 million, represent the excess of acquisition cost over the amounts assigned to other assets acquired in the Company's acquisitions, and is amortized on a straight-line basis over a 40-year period. It is the Company's policy to account for FCC licenses, goodwill and all other intangible assets at the lower of amortized cost or estimated realizable value. As part of an ongoing review of the valuation and amortization of intangible assets of the Company and its subsidiaries, management assesses the carrying value of the intangible assets if facts and circumstances suggest that there may be impairment. If this review indicates that the intangibles will not be recoverable as determined by a non-discounted cash flow analysis of the operating assets over the remaining amortization period, the carrying value of the intangible assets would be reduced to estimated realizable value. Barter Transactions Revenue from barter transactions (advertising provided in exchange for goods and services) is recognized when advertisements are broadcast, and merchandise or services received are charged to expense (or F-36 AURORA COMMUNICATIONS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) capitalized as appropriate) when received or used. Barter revenue and expense reflected in the consolidated statement of operations for the period ended December 31, 1999 was $490,791 and $412,269, respectively. Revenue The primary source of revenue is the sale of advertising to local, regional and national customers. Revenue is presented net of agency commissions of $719,134, and is recognized when advertisements are broadcast. Cash Equivalents Cash equivalents consist of short-term, highly liquid investments which are readily convertible into cash and have an original maturity of three months or less when purchased. Advertising and promotion Expenditures for advertising and promotion are charged to expense as incurred and totaled $430,000 in 1999. Income Taxes No provision for federal, state or local income taxes or credits has been reflected in the accompanying financial statements because such obligations or credits are liabilities or benefits of the members. Risks and Uncertainties The preparation of financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Actual results may differ from those estimates. Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of trade receivables. The Company's revenue is derived primarily from local broadcast advertisers who are impacted by the local economy. The Company routinely assesses the credit worthiness of its customers and generally does not require collateral or other security to support customer receivables. 3. Acquisitions At December 31, 1999, the Company owned and operated five FM and four AM radio stations. On August 31, 1999, the Company acquired substantially all the assets of radio stations WEBE-FM/WICC-AM, Bridgeport, Connecticut for $66.0 million plus transaction costs. On October 27, 1999, the Company acquired substantially all the assets of radio stations WFAS-AM/WFAS-FM/WFAF-FM (formerly WZZN-FM), Westchester County, New York for $20.25 million plus transaction costs. F-37 AURORA COMMUNICATIONS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) On October 27, 1999, the Company acquired substantially all the assets of radio stations WRKI-FM/WINE-AM, Danbury, Connecticut and WAXB-FM/WPUT-AM, Patterson, New York for $11.25 million plus transaction costs. All of the acquisitions have been accounted for using the purchase method of accounting. Accordingly, the purchase price of each acquisition has been allocated to the assets based upon their respective estimated fair values at the date of acquisition. The results of operations of the properties acquired are included in the Company's consolidated results of operations from the respective dates of acquisition. The aggregate purchase prices have been allocated to the assets acquired and liabilities assumed as follows: Current assets.................................................. $ 63,507 Property and equipment.......................................... 5,663,796 FCC licenses and goodwill....................................... 92,679,514 ----------- 98,406,817 ----------- Current liabilities........................................... (237,921) ----------- $98,168,896 ===========
4. Pro Forma Financial Information (Unaudited) Year ended December 31, 1999 Net revenues.................................................. $ 21,495,573 Net loss...................................................... $ (2,055,385)
The unaudited pro forma information for the year ended December 31, 1999 assumes that the acquisitions described in Note 3, had occurred on January 1, 1999. The pro forma information is not necessarily indicative either of the results of operations that would have occurred had these transactions been made at the beginning of the period, or of future results of operations. 5. Long-Term Debt A summary of long-term debt as of December 31, 1999 is as follows: Term loan at the LIBOR rate plus 3.5%; interest payable monthly; quarterly commitment reductions from March 31, 2000 through December 31, 2005 (A)(C)............................. $20,000,000 Revolving loan at the LIBOR rate plus 3.5%; interest payable monthly; matures November 30, 2005 (A)(C).................... 30,756,250 Subordinated debentures; cash interest payable quarterly at 8%; payment-in-kind interest compounds quarterly at 9%; principal due in September 2006 (B)(C)....................... 13,500,000 ----------- 64,256,250 Less current portion.......................................... -- ----------- $64,256,250 ===========
(A) On August 31, 1999, Aurora Holding, LLC ("Holding"), a wholly-owned subsidiary of the Company entered into credit facilities totaling $75.0 million with Heller Financial, Inc. and Union Bank of California, N.A., as agents (the "Senior Loans"). The Senior Loans consist of a $20.0 million term loan and a $55.0 million revolving loan. The initial borrowings under the Senior Loans were used to partially fund the F-38 AURORA COMMUNICATIONS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Company's acquisitions, pay transaction costs and provide working capital. The Senior Loans contain covenants which require, among other things, that Holding and its subsidiaries maintain certain financial levels, principally with respect to EBITDA (earnings before interest, income tax, depreciation and amortization) and leverage ratios, and limit the amount of capital expenditures. The Senior Loans also restrict the payment of cash dividends. The Senior Loans are collateralized by pledges of the tangible and intangible assets of Holding and its subsidiaries, as well as the membership interests of Holding and its subsidiaries. At December 31, 1999, the Company has additional availability under the revolving credit facility of $24.2 million, of which $5.4 million may currently be borrowed. No amounts due under the term loan are classified as current liabilities on the consolidated balance sheet at December 31, 1999 because the availability under the revolving facility is sufficient to pay amounts scheduled to be repaid in 2000 under the term loan. The Company pays an annual commitment fee of 0.5% of the unused commitment. (B) On September 10, 1999, Holding entered into a subordinated loan agreement with Allied Capital Corporation and Allied Investment Corporation which provides for subordinated debentures totaling $13.5 million. Proceeds from the debentures were used to partially fund the Company's acquisitions and to pay transaction costs. The subordinated debentures mature in September 2006 and bear interest at 17%. From the date of issuance through the first anniversary, interest is paid quarterly in cash at a rate of 8% per year. From the first anniversary to the second anniversary, interest is paid quarterly in cash at a rate of 9% per year. From the second anniversary through maturity, interest is paid quarterly in cash at a rate of 10% per year. Deferred interest accrues and compounds quarterly equal to the difference between 17% and the cash pay rate and is payable at the maturity date. The subordinated loan agreement contains covenants which require, among other things, that Holding and its subsidiaries maintain certain financial levels, principally with respect to EBITDA (earnings before interest, income tax, depreciation and amortization) and leverage ratios, and limit the amount of capital expenditures. The subordinated loan agreement also restricts the payment of cash dividends. Payment of amounts owed under the debentures is guaranteed by the Company and Holdings' subsidiaries. (C) In the event of a default under the Senior Loans or the subordinated debentures prior to June 29, 2000, upon notice by a lender, the members of the Company shall be required to make additional capital contributions of an amount up to 75% of the trailing twelve month broadcast cash flow of the Company's radio stations measured at the date of acquisition. The proceeds from such contributions shall be used to repay a portion of the Senior Loans' principal. The obligation to make such additional capital contributions shall terminate when certain conditions are met, principally with respect to completing additional radio station acquisitions that provide greater geographic diversity. At December 31, 1999, exclusive of the Revolving loan, the aggregate amounts of long-term debt due scheduled during the next five years are as follows:
Year: Amount ----- ----------- 2000............................................................. $ 2,000,000 2001............................................................. 2,500,000 2002............................................................. 3,000,000 2003............................................................. 3,500,000 2004............................................................. 4,000,000 Thereafter....................................................... 18,500,000
Cash paid for interest during 1999 was approximately $827,000. The fair value of the debt approximates net book value. F-39 AURORA COMMUNICATIONS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 6. Property and Equipment Property and equipment at December 31, 1999 consists of the following: Land............................................................. $1,107,644 Buildings........................................................ 1,238,520 Equipment........................................................ 3,525,067 ---------- 5,871,231 Less accumulated depreciation.................................... (157,829) ---------- $5,713,402 ==========
At December 31, 1999, all property and equipment is pledged as collateral for the debt disclosed in Note 5. 7. Commitments The Company leases office and broadcast tower space, vehicles and office equipment. Rental expense amounted to approximately $159,000 for the period from commencement of operations through December 31, 1999. The minimum aggregate annual rentals under non-cancelable operating leases are payable as follows:
Year: Amount ----- ---------- 2000.............................................................. $ 576,000 2001.............................................................. 261,000 2002.............................................................. 231,000 2003.............................................................. 184,000 2004.............................................................. 147,000 Thereafter........................................................ 219,000 ---------- $1,618,000 ==========
8. Related Party Transactions The Company pays Aurora Management, Inc., its managing member, a management and monitoring fee at the annual rate of $150,000 per year. Under the long-term debt agreements described in Note 5, the Company borrowed funds from certain members of the Company or their affiliates. Interest on the outstanding principal amounts and certain other fees are paid to such members or their affiliates. On October 27, 1999, the Company acquired substantially all the assets of radio stations WFAS-AM/WFAS-FM/WFAF-FM (formerly WZZN-FM), Westchester County, New York from Westchester Radio, LLC (see Note 3). At the time of the acquisition, Frank G. Washington, a member of the Company, was a member of Westchester Radio, LLC. F-40 AURORA COMMUNICATIONS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 9. Members' Capital The classes of the Company's membership interests consist of Preferred Units and Common Units (which are further designated as Invested Common Units, Callable Common Units and Promoted Common Units). Preferred equity interests The Company may issue Preferred Units, no par value, which are non- convertible. During 1999, the Company had issued 3,860,000 preferred units for an aggregate $38.6 million. The holders of Preferred Units are entitled to a preferred return at the annual rate of 10%, compounded quarterly, cumulative to the extent not distributed. Undistributed preferred dividends as of December 31, 1999 were approximately, $1,293,000. Common equity interests The Company may issue Common Units, no par value, which represent a common profits percentage. Each holder of Preferred Units received an equal number of Invested Common Units. At December 31, 1999, issued and outstanding Invested Common Units, Callable Common Units, Promoted Common Units and Total Common Units were 3,860,000; 255,238; 527,012; and 4,642,250, respectively. Allocation of profits and losses/liquidation preference After giving effect to tax distributions, if any, paid to the members, the Company's net income is allocated to the members' capital accounts in the following priority: (i) to the Preferred Unit holders until the aggregate net income allocated equals the aggregate net losses previously allocated to the Preferred Unit holders; (ii) to the Preferred Unit holders in an amount equal to the cumulative preferred return; and (iii) to the members in accordance with their respective common profits percentages. Net losses of the Company, after giving effect to tax distributions, if any, paid to the members, are allocated to the members' capital accounts in the following priority: (i) to the members until the aggregate net losses allocated to the members' Common Units equals the aggregate net income previously allocated to the members with respect to their Common Units; (ii) to the members in proportion to their respective adjusted common capital account balances until the adjusted common account balances of all members have been reduced to zero; (iii) to the Preferred Unit holders until the aggregate net losses allocated to the Preferred Unit holders equals the excess, if any, of the sum of aggregate net income allocated to the Preferred Units over the amount of aggregate tax distributions and preferred return distributions made to the Preferred Unit holders; and (iv) to the Preferred Unit holders in proportion to their respective adjusted capital account balances until the adjusted capital account balances of all Preferred Unit holders have been reduced to zero. Upon a liquidation of the Company, after all the Company's liabilities have been paid, remaining proceeds shall be distributed as follows: (i) to the Preferred Unit holders in an amount equal to the lesser of such Preferred Unit holder's adjusted preferred capital contribution, and such Preferred Unit holders positive capital account balance; (ii) to the Common Unit holders in proportion to their positive capital account balances. Optional equity contributions On or prior to April 3, 2000, a member of the Company and director of Aurora Management, Inc., may at his option make additional capital contributions with an aggregate value of up to $900,000. During the first quarter of 2000, the capital contribution was made by the member. F-41 AURORA COMMUNICATIONS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) On or prior to May 3, 2004, the Company's President, Chief Executive Officer and member, may make additional capital contributions at his option with an aggregate value of up to approximately $1,652,000. 10. Impact of Year 2000 (Unaudited) In late 1999, the Company completed its remediation and testing of systems. As a result of its planning and implementation efforts, the Company experienced no significant disruptions in mission critical information technology and non-information technology systems and believes those systems successfully responded to the Year 2000 date change. Costs incurred by the Company in connection with remediating its systems were immaterial. The Company is not aware of any material problems resulting from Year 2000 issues, either with the programming of its radio stations, its internal systems, or the products and services of third parties. The Company will continue to monitor its mission critical computer applications and those of its significant suppliers and vendors throughout the year 2000 to ensure that any latent Year 2000 matters that may arise are addressed promptly. 11. Subsequent Event (Unaudited) On March 24, 2000, the Company's members entered into an agreement to sell all the ownership interests in the Company to Nassau Broadcasting Partners, L.P. for approximately $185.0 million less long-term debt, consisting of approximately $150.0 million plus an ownership interest in Nassau Broadcasting Partners, L.P. The transaction is subject to various regulatory approvals. F-42 AURORA COMMUNICATIONS, LLC (A Limited Liability Company) CONDENSED CONSOLIDATED BALANCE SHEET
March 31, December 31, 2000 1999 ------------ ------------ (Unaudited) Assets Current assets: Cash and cash equivalents....................... $ 1,635,924 $ 1,096,594 Accounts receivable, less allowance for doubtful accounts of $81,310 and $43,789, respectively.. 3,401,235 3,694,071 Prepaid expenses and other current assets....... 231,208 164,477 ------------ ------------ Total current assets.............................. 5,268,367 4,955,142 Property and equipment, at cost, less accumulated depreciation of $337,495 and $157, 829, respectively..................................... 5,661,885 5,713,402 FCC licenses and goodwill, net of accumulated amortization of $1,242,876 and $666,779, respectively..................................... 91,459,424 92,012,735 Deferred financing costs, net of accumulated amortization of $210,320 and $119, 772, respectively..................................... 2,088,734 2,179,283 ------------ ------------ Total assets...................................... $104,478,410 $104,860,562 ============ ============ Liabilities and members' capital Current liabilities: Accounts payable and accrued expenses........... $ 929,614 $ 1,383,447 Accrued interest payable........................ 514,021 807,359 ------------ ------------ Total current liabilities......................... 1,443,635 2,190,806 Long-term debt.................................... 64,373,115 64,256,250 Other noncurrent liabilities...................... 705,785 383,005 Commitments and contingencies..................... -- -- Members' capital: Members interests................................. 39,505,270 38,605,270 Accumulated deficit............................... (1,549,395) (574,769) ------------ ------------ Total members' capital............................ 37,955,875 38,030,501 ------------ ------------ Total liabilities and members' capital............ $104,478,410 $104,860,562 ============ ============
See notes to condensed consolidated financial statements F-43 AURORA COMMUNICATIONS, LLC (A Limited Liability Company) CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 (Unaudited) Net revenues....................................................... $4,959,734 Operating expenses: Selling.......................................................... 930,343 Programming and promotion........................................ 921,449 Technical........................................................ 101,795 General and administrative....................................... 685,448 Depreciation and amortization.................................... 756,047 Corporate expenses............................................... 567,758 ---------- Total operating expenses........................................... 3,962,840 ---------- Operating income................................................... 996,894 Interest income.................................................... 5,427 Interest expense................................................... 1,976,947 ---------- Net loss........................................................... $ (974,626) ==========
See notes to condensed consolidated financial statements F-44 AURORA COMMUNICATIONS, LLC (A Limited Liability Company) CONDENSED CONSOLIDATED STATEMENT OF MEMBERS' CAPITAL (Unaudited)
Preferred Units Total Common Units Additional --------------------- ---------------------Paid-in Accumulated Units Value Units Value Capital Deficit Total --------- ----------- ----------- ------------------ ----------- ----------- Balance at December 31, 1999................... 3,860,000 $38,600,000 4,642,250 $-- $5,270 $ (574,769) $38,030,501 Preferred contribution.. 90,000 900,000 -- -- -- -- 900,000 Net loss................ -- -- -- -- -- (974,626) (974,626) --------- ----------- ----------- ------ ------ ----------- ----------- Balance at March 31, 2000................... 3,950,000 $39,500,000 4,642,250 $-- $5,270 $(1,549,395) $37,955,875 ========= =========== =========== ====== ====== =========== ===========
See notes to condensed consolidated financial statements F-45 AURORA COMMUNICATIONS, LLC (A Limited Liability Company) CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2000 (Unaudited) Cash flows from operating activities Net loss.......................................................... $ (974,626) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization................................... 756,047 Non-cash interest expense....................................... 413,329 Changes in current assets and current liabilities: Decrease in accounts receivable............................... 292,836 Increase in prepaid expenses and other current assets......... (66,731) Decrease in accounts payable and accrued expenses............. (453,833) Decrease in accrued interest payable.......................... (293,338) ---------- Total adjustments................................................. 648,310 ---------- Net cash used in operating activities............................. (326,316) ---------- Cash flows from investing activities Payments for business acquisitions................................ (23,070) Capital expenditures.............................................. (128,149) ---------- Net cash used in investing activities............................. (151,219) ---------- Cash flows from financing activities Proceeds from issuance of long-term debt, net..................... 116,865 Proceeds from issuance of membership interests.................... 900,000 ---------- Net cash provided by financing activities......................... 1,016,865 ---------- Net increase in cash and cash equivalents......................... 539,330 Cash and cash equivalents at beginning of period.................. 1,096,594 ---------- Cash and cash equivalents at end of period........................ $1,635,924 ==========
See notes to condensed consolidated financial statement. F-46 AURORA COMMUNICATIONS, LLC NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) March 31, 2000 1.Basis of Presentation Aurora Communications, LLC (the "Company") is a limited liability company formed in January 1999 and commencing operations in May 1999. The Company is engaged in the acquisition and operation of radio stations throughout the United States. The Company is a subsidiary of Aurora Management, Inc., its majority owner and managing member. The accompanying unaudited condensed consolidated financial statements include Aurora Communications, LLC and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The accompanying unaudited condensed consolidated financial statements 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. However, such information reflects all adjustments (consisting solely of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations, and cash flows for the interim periods presented. Operating results for the period ended March 31, 2000 are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. For further information, refer to the consolidated financial statements and footnotes thereto for the period ended December 31, 1999. 2.Acquisitions At March 31, 2000, the Company owned and operated five FM and four AM radio stations. On August 31, 1999, the Company acquired substantially all the assets of radio stations WEBE-FM/WICC-AM, Bridgeport, Connecticut for $66.0 million plus transaction costs. On October 27, 1999, the Company acquired substantially all the assets of radio stations WFAS-AM/WFAS-FM/WFAF-FM, Westchester County, New York for $20.25 million plus transaction costs. On October 27, 1999, the Company acquired substantially all the assets of radio stations WRKI-FM/WINE-AM, Danbury, Connecticut and WAXB-FM/WPUT-AM, Patterson, New York for $11.25 million plus transaction costs. All of the acquisitions have been accounted for using the purchase method of accounting. Accordingly, the purchase price of each acquisition has been allocated to the assets based upon their respective estimated fair values at the date of acquisition. The results of operations of the properties acquired are included in the Company's consolidated results of operations from the respective dates of acquisition. 3.Members' Capital In March 2000, a member of the Company and director of Aurora Management, Inc., made a preferred capital contribution of $900,000. 4.Advertising and Promotion Expenditures for advertising and promotion are charged to expense as incurred and totaled $140,000 for the three months ended March 31, 2000. F-47 AURORA COMMUNICATIONS, LLC NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)--(Continued) March 31, 2000 5.Related Party Transactions The Company paid Aurora Management, Inc., its managing member, a management and monitoring fee, totaling $37,500 for the three months ended March 31, 2000. Under its long-term debt agreements, the Company borrowed funds from certain members of the Company or their affiliates. Interest on the outstanding principal amounts and certain other fees are paid to such members or their affiliates. 6.Subsequent Event On March 24, 2000, the Company's members entered into an agreement to sell all the ownership interests in the Company to Nassau Broadcasting Partners, L.P. for approximately $185.0 million less long-term debt, consisting of approximately $150.0 million plus an ownership interest in Nassau Broadcasting Partners, L.P. The transaction is subject to various regulatory approvals. F-48 REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Directors Clear Channel Communications, Inc. We have audited the accompanying combined balance sheets of Clear Channel Communications, Inc.'s radio stations WODE(FM) and WEEX(AM) as of December 31, 1999 and 1998, and the related combined statements of operations and cash flows for the year ended December 31, 1999 and the period from January 29, 1998 (commencement of operations by Clear Channel Communications, Inc.) to December 31, 1998. These financial statements are the responsibility of the management of Clear Channel Communications, Inc. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of Clear Channel Communications, Inc.'s radio stations WODE(FM) and WEEX(AM) at December 31, 1999 and 1998, and the combined results of their operations and their cash flows for the year ended December 31, 1999 and the period from January 29, 1998 to December 31, 1998, in conformity with accounting principles generally accepted in the United States. Ernst & Young LLP San Antonio, Texas May 26, 2000 F-49 RADIO STATIONS WODE(FM)/WEEX(AM) COMBINED BALANCE SHEETS
December 31 ----------------------- March 31 2000 1999 1998 ------------- ----------- ----------- (Unaudited) Assets Current assets: Cash and cash equivalents............. $ 3,237 $ 3,300 $ 2,821 Accounts receivable, net.............. 544,294 459,258 763,393 ----------- ----------- ----------- Total current assets.................... 547,531 462,558 766,214 Property, plant, and equipment: Land, building, and improvements...... 517,550 517,550 458,823 Transmitter and studio equipment...... 729,678 708,450 682,664 Furniture and other equipment......... 150,722 149,637 156,541 Construction in progress.............. -- 19,098 53,946 ----------- ----------- ----------- 1,397,950 1,394,735 1,351,974 Less accumulated depreciation......... 278,286 241,411 107,688 ----------- ----------- ----------- 1,119,664 1,153,324 1,244,286 Intangible assets: Licenses and goodwill................. 27,773,651 27,773,651 27,773,651 Less accumulated amortization......... 2,417,306 2,138,387 1,022,707 ----------- ----------- ----------- 25,356,345 25,635,264 26,750,944 ----------- ----------- ----------- Total assets............................ $27,023,540 $27,251,146 $28,761,444 =========== =========== =========== Liabilities and Parent Company Investment Account Current liabilities: Accounts payable...................... $ 84,400 $ 55,943 $ 301 Accrued expenses...................... 19,638 17,796 25,858 ----------- ----------- ----------- Total current liabilities............... 104,038 73,739 26,159 Parent company investment account....... 26,919,502 27,177,407 28,735,285 ----------- ----------- ----------- Total liabilities and parent company investment account..................... $27,023,540 $27,251,146 $28,761,444 =========== =========== ===========
See accompanying notes. F-50 RADIO STATIONS WODE(FM)/WEEX(AM) COMBINED STATEMENTS OF OPERATIONS
Three Months Ended Period From March 31 Year Ended January 29 to -------------------- December 31 December 31 2000 1999 1999 1998 --------- --------- ----------- ------------- (Unaudited) Revenue: Gross revenue................ $ 944,342 $ 959,376 $4,115,008 $4,717,270 Less agency commissions...... 76,029 95,579 367,742 425,956 --------- --------- ---------- ---------- Net revenue.................... 868,313 863,797 3,747,266 4,291,314 Expenses: Operating expenses........... 515,348 494,531 2,281,254 2,032,836 Depreciation and amortization................ 315,795 311,881 1,259,093 1,130,395 Corporate general and administrative expenses..... 27,384 36,538 103,269 128,959 --------- --------- ---------- ---------- Total expenses................. 858,527 842,950 3,643,616 3,292,190 --------- --------- ---------- ---------- Operating income............... 9,786 20,847 103,650 999,124 Interest expense............... (293,310) (379,113) (1,473,888) (1,520,608) Loss on disposal of assets..... -- -- (29,060) -- --------- --------- ---------- ---------- Loss before income taxes....... (283,524) (358,266) (1,399,298) (521,484) Income tax benefit............. 127,586 161,220 629,684 234,668 --------- --------- ---------- ---------- Net loss....................... $(155,938) $(197,046) $ (769,614) $ (286,816) ========= ========= ========== ==========
See accompanying notes. F-51 RADIO STATIONS WODE(FM)/WEEX(AM) COMBINED STATEMENTS OF CASH FLOWS
Three Months Ended Period From March 31 Year Ended January 29 to -------------------- December 31 December 31 2000 1999 1999 1998 --------- --------- ----------- ------------- (Unaudited) Operating Activities Net loss...................... $(155,938) $(197,046) $(769,614) $ (286,816) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation................ 36,875 32,962 143,413 107,688 Amortization of intangibles................ 278,920 278,919 1,115,680 1,022,707 Loss on disposal of fixed assets -- -- 29,060 -- Changes in operating assets and liabilities: (Increase) decrease in accounts receivable...... (85,036) 149,099 304,135 (763,393) Increase (decrease) in accounts payable and accrued expenses......... 30,299 (1,261) 47,580 26,159 --------- --------- --------- ----------- Net cash provided by operating activities................... 105,120 262,673 870,254 106,345 Investing Activities Purchases of property, plant, and equipment................ (3,216) (8,386) (81,511) (80,252) Acquisition of broadcasting assets....................... -- -- -- (29,023,663) --------- --------- --------- ----------- Net cash used in investing activities................... (3,216) (8,386) (81,511) (29,103,915) Financing Activities Net advances from (repayments to) parent company........... (101,967) (245,379) (788,264) 29,000,391 --------- --------- --------- ----------- Net cash (used in) provided by financing activities......... (101,967) (245,379) (788,264) 29,000,391 --------- --------- --------- ----------- Net (decrease) increase in cash and cash equivalents.... (63) 8,908 479 2,821 Cash and cash equivalents at beginning of period.......... 3,300 2,821 2,821 -- --------- --------- --------- ----------- Cash and cash equivalents at end of period................ $ 3,237 $ 11,729 $ 3,300 $ 2,821 ========= ========= ========= ===========
See accompanying notes. F-52 RADIO STATIONS WODE(FM)/WEEX(AM) NOTES TO COMBINED FINANCIAL STATEMENTS March 31, 2000 and December 31, 1999 and 1998 1. Summary of Significant Accounting Policies Nature of Business Clear Channel Communications, Inc. (Clear Channel) is a diversified media company which was incorporated in Texas in 1974. Clear Channel owns, programs, or sells airtime for radio and television stations, and is one of the world's largest outdoor advertising companies based on total advertising display inventory in the United States and internationally. Clear Channel owns and operates radio stations WODE(FM) and WEEX(AM) (the Stations) located in Allentown, Pennsylvania. These combined financial statements have been prepared in connection with the proposed sale of the Stations to Nassau Broadcasting Partners, L.P. These combined financial statements present the operations of the Stations on a "carved-out" basis. The combined financial statements have been prepared as if the Stations had operated as a stand-alone entity for all periods presented, and include only those assets, liabilities, revenues, and expenses directly attributable to the Stations' operation. Corporate expenses, interest expense, and income taxes have been allocated to the Stations as indicated in Note 3. The financial information included herein does not necessarily reflect the financial position and results of operations of what the Stations would have been had they operated as a stand-alone entity during the periods covered, and may not be indicative of future operations or financial position. The financial statements for the three months ended March 31, 2000 and 1999 are unaudited, but in the opinion of management, such financial statements have been presented on the same basis as the audited financial statements for the year ended December 31, 1999, and include all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the financial position and results of operations and cash flows for these periods. Cash and Cash Equivalents Cash and cash equivalents include all highly liquid investments with an original maturity of three months or less. Accounts Receivable Accounts receivable are stated net of agency commissions, as well as any applicable allowance for uncollectible accounts. Allowances for uncollectible accounts at March 31, 2000 and December 31, 1999 and 1998 were approximately $42,400, $32,900, and $27,000, respectively. The provision for uncollectible accounts and write-offs of uncollectible accounts were as follows:
Three Months Ended Period From March 31 Year Ended January 29 to -------------- December 31 December 31 2000 1999 1999 1998 ------ ------- ----------- ------------- Provision for uncollectible accounts.............. $9,400 $10,500 $22,800 $28,900 Write-offs of uncollectible accounts.............. -- -- 16,800 1,900
F-53 RADIO STATIONS WODE(FM)/WEEX(AM) NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) March 31, 2000 and December 31, 1999 and 1998 Property, Plant, and Equipment Property, plant, and equipment are stated at cost. Depreciation is computed principally by the straight-line method at rates that, in the opinion of management, are adequate to allocate the cost of such assets over their estimated useful lives, which are as follows: Buildings......................................... 10 to 30 years Transmitter and studio equipment.................. 7 to 15 years Furniture and other equipment..................... 2 to 10 years Leasehold improvements............................ generally life of lease
Expenditures for maintenance and repairs are charged to operations as incurred, whereas expenditures for renewal and betterments are capitalized. Intangible Assets Intangible assets are stated at cost and are being amortized using the straight-line method. Excess cost over the fair value of net assets acquired (goodwill) and FCC licenses are amortized over 25 years. The periods of amortization are evaluated annually to determine whether circumstances warrant revision. The carrying value of intangible assets is reviewed on a regular basis for the existence of facts or circumstances, both internally and externally, that may suggest impairment. If such impairment is identified, the impairment loss will be measured by comparing the estimated future undiscounted cash flows to the asset's carrying value. To date, no such impairment has been indicated. Parent Company Investment Account The Stations were acquired by Clear Channel for cash through an asset purchase agreement. As such, the Stations are not a legal entity and have no separate capital accounts. The parent company investment account contains the accumulated deficit from operations, offset by nonmaturing advances from and repayments to Clear Channel. Income Taxes The Stations are included in the consolidated federal income tax return of Clear Channel. For purposes of the accompanying financial statements, income tax benefits have been calculated on a separate-company basis at the federal and state statutory rates. Tax assets are included in the parent company investment account. Revenue Recognition Broadcasting revenue, which consists primarily of the sale of airtime to local, regional, and national customers, is recognized as advertisements or programs are broadcast and is generally billed monthly. Revenue from barter transactions is recognized when advertisements are broadcast. Merchandise or services received are charged to expense when received or used. For the three months ended March 31, 2000 and 1999, the year ended December 31, 1999, and the period from January 29, 1998 through December 31, 1998, the Stations recognized barter revenue of approximately $69,000, $-0- , $207,700, and $105,000, respectively. Barter expense approximated barter revenue in those same periods. F-54 RADIO STATIONS WODE(FM)/WEEX(AM) NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) March 31, 2000 and December 31, 1999 and 1998 Advertising and Promotion Expenditures for advertising and promotion are charged to expense as incurred and totaled approximately $2,000, $1,300, $152,800, and $181,000 for the three months ended March 31, 2000 and 1999, the year ended December 31, 1999, and the period from January 29, 1998 through December 31, 1998, respectively. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 2. Commitments Clear Channel leases certain equipment and tower space under long-term operating leases. At March 31, 2000, the Stations' future minimum rental commitments, under non-cancelable lease agreements with terms in excess of one year, consist of the following: Remaining 2000 payments.......................................... $ 6,500 2001............................................................. 8,000 ------- $14,500 =======
Rent expense charged to operations for the three months ended March 31, 2000 and 1999, the year ended December 31, 1999, and the period from January 29, 1998 through December 31, 1998 was approximately $2,300, $2,800, $11,300, and $9,900, respectively. 3. Corporate Allocations As described in Note 1, the combined financial statements present the operations of the Stations on a "carved-out" basis. Certain expenses, including corporate general and administrative expenses, interest expense, and income tax benefits, have been allocated to the Stations. Corporate general and administrative expenses have been allocated to the Stations based on their proportionate share of broadcast net revenues. Interest has been allocated to the Stations based upon management's estimate of the total Clear Channel debt attributable to the acquisition and operation of the Stations, using Clear Channel's weighted-average interest rate of 4.56%, 5.51%, and 5.86% for the three months ended March 31, 2000, the year ended December 31, 1999, and the period from January 29, 1998 through December 31, 1998, respectively. Income tax benefits have been allocated to the Stations based on net loss before income taxes at federal and state statutory tax rates. Corporate allocations of general and administrative expenses, interest expense, and income tax benefits are included in the parent company investment account. 4. Pending Sale of Stations (Unaudited) On February 29, 2000, Nassau Broadcasting Partners, L.P. entered into an asset purchase agreement with Clear Channel to purchase the FCC licenses and certain operating assets of the Stations for approximately $30 million. The transaction is subject to consummation of the merger between AMFM, Inc. and Clear Channel, and FCC approvals. F-55 WEBE and WICC Radio Stations (Divisions of ML Media Partners, L.P.) Combined Balance Sheet as of August 31, 1999, and Related Combined Statements of Operations and Accumulated Earnings and Cash Flows for the Period January 1, 1999 to August 31, 1999, and Independent Auditors' Report F-56 WEBE AND WICC RADIO STATIONS (Divisions of ML Media Partners, L.P.) TABLE OF CONTENTS
Page ---- INDEPENDENT AUDITORS' REPORT............................................. 1 COMBINED FINANCIAL STATEMENTS: Balance Sheet as of August 31, 1999...................................... 2 Statement of Operations and Accumulated Earnings for the Period January 1, 1999 to August 31, 1999.............................................. 3 Statements of Cash Flows for the Period January 1, 1999 to August 31, 1999.................................................................... 4 Notes to Combined Financial Statements................................... 5-8
F-57 INDEPENDENT AUDITORS' REPORT WEBE and WICC Radio Stations (Divisions of ML Media Partners, L.P.) We have audited the accompanying combined balance sheet of WEBE and WICC Radio Stations (Divisions of ML Media Partners, L.P.) (collectively, the "Combined Group") as of August 31, 1999, and the related combined statements of operations and accumulated earnings, and cash flows for the period January 1, 1999 to August 31, 1999. These financial statements are the responsibility of the Combined Group's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such combined financial statements present fairly, in all material respects, the financial position of WEBE and WICC Radio Stations (Divisions of ML Media Partners, L.P.) at August 31, 1999, and the results of their operations and their cash flows for the period January 1, 1999 to August 31, 1999 in conformity with generally accepted accounting principles. Deloitte & Touche LLP New York, New York December 10, 1999 (March 24, 2000 as to Note 8) F-58 WEBE AND WICC RADIO STATIONS (Divisions of ML Media Partners, L.P.) COMBINED BALANCE SHEET AUGUST 31, 1999 Assets Current assets: Cash and cash equivalents........................................ $ 7,058,468 Accounts receivable--trade, less allowance for doubtful accounts of $ 130,823.................................................... 2,487,258 Prepaid barter expense........................................... 90,204 ----------- Total current assets............................................... 9,635,930 ----------- Property: Building......................................................... 76,368 Towers and antennas.............................................. 755,291 Broadcasting equipment........................................... 1,250,000 Furniture, fixtures and office equipment......................... 390,858 Leasehold improvements........................................... 155,232 ----------- Total.............................................................. 2,627,749 Less accumulated depreciation and amortization................... 2,539,910 ----------- Property--Net...................................................... 87,839 ----------- Other assets: Goodwill......................................................... 14,777,376 Other intangible assets.......................................... 761,624 ----------- Total.............................................................. 15,539,000 Less accumulated amortization.................................... 4,612,184 ----------- OTHER ASSETS--Net................................................ 10,926,816 ----------- Total assets....................................................... $20,650,585 =========== Liabilities and Divisional Equity Current liabilities: Accounts payable................................................. $ 84,416 Deferred barter revenue.......................................... 79,102 Accrued liabilities--other....................................... 280,936 ----------- Total current liabilities.......................................... 444,454 ----------- Divisional equity: Division capital................................................. 4,500,000 Payable to affiliates............................................ 6,649,463 Accumulated earnings............................................. 9,056,668 ----------- Total.............................................................. 20,206,131 ----------- Total liabilities and divisional equity............................ $20,650,585 ===========
See notes to combined financial statements. F-59 WEBE AND WICC RADIO STATIONS (Divisions of ML Media Partners, L.P.) COMBINED STATEMENT OF OPERATIONS AND ACCUMULATED EARNINGS FOR THE PERIOD JANUARY 1, 1999 TO AUGUST 31, 1999 Revenue: Local............................................................. $6,160,981 National.......................................................... 2,238,107 Trades............................................................ 388,564 Other............................................................. 318,481 ---------- Total............................................................... 9,106,133 Less commissions of agencies........................................ 1,083,443 ---------- Net revenue......................................................... 8,022,690 ---------- Operating expenses before depreciation and amortization: Direct............................................................ 426,318 Technical......................................................... 171,769 Programming....................................................... 660,051 News.............................................................. 163,141 Selling........................................................... 1,467,576 Promotion......................................................... 303,344 General and administrative........................................ 920,936 Corporate administrative.......................................... 532,500 Management fee.................................................... 1,334,216 ---------- Total............................................................... 5,979,851 ---------- Operating income before depreciation and amortization............... 2,042,839 Depreciation and amortization....................................... 274,650 ---------- Income before extraordinary item.................................... 1,768,189 Extraordinary item--forgiveness of indebtedness..................... 1,688,693 ---------- Net income.......................................................... 3,456,882 Accumulated earnings, beginning of period........................... 5,599,786 ---------- Accumulated earnings, end of period................................. $9,056,668 ==========
See notes to combined financial statements. F-60 WEBE AND WICC RADIO STATIONS (Divisions of ML Media Partners, L.P.) COMBINED STATEMENT OF CASH FLOWS FOR THE PERIOD JANUARY 1, 1999 TO AUGUST 31, 1999 Cash flows from Operating Activities: Net income....................................................... $3,456,882 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation................................................... 18,873 Amortization................................................... 255,777 Bad debt expense............................................... 34,870 Forgiveness of indebtedness.................................... (1,688,693) Changes in operating assets (increase) decrease: Accounts receivable.......................................... (318,493) Prepaid barter expense....................................... (40,428) Other current assets......................................... 28,209 Changes in operating liabilities increase (decrease): Accounts payable and other accrued liabilities............... 6,154 Deferred barter revenue...................................... (15,073) ---------- Net cash provided by operating activities.................. 1,738,078 ---------- Cash flows from Investing Activities: ---------- Capital expenditures............................................. (5,287) ---------- Cash flows from Financing Activities: Net decrease in payable to parent and affiliates................. 1,405,215 ---------- Net increase in cash and cash equivalents.......................... 3,138,006 Cash and cash equivalents, beginning of period..................... 3,920,462 ---------- Cash and cash equivalents, end of period........................... $7,058,468 ==========
See notes to combined financial statements. F-61 WEBE AND WICC RADIO STATIONS (Divisions of ML Media Partners, L.P. NOTES TO COMBINED FINANCIAL STATEMENTS For the Period January 1, 1999 to August 31, 1999 1. Organization, Ownership and Operations WEBE and WICC radio stations (collectively, the "Combined Group") are divisions of ML Media Partners, L.P. ("ML"). Both of the radio stations are located in Fairfield County, Connecticut. On April 22, 1999, ML Media Partners L.P. entered into an asset purchase agreement to sell the assets of WEBE and WICC to Aurora Communications LLC for $66 million. The effective closing date for this transaction is August 31, 1999. Based upon regular assessments of the Combined Group's operations performed by key management, the Combined Group has determined that its reportable segment is commercial radio broadcasting. The economic characteristics, services, production process, customer type and distribution methods for the Combined Group's two radio stations are substantially similar and have therefore been aggregated as one reportable segment. 2. Summary of Significant Accounting Policies Principles of Combination--The accompanying combined financial statements include the accounts of the Combined Group. All significant intercompany balances and transactions have been eliminated in combination. Property--Property is stated at cost less accumulated depreciation and amortization. Leasehold improvements are amortized over their estimated useful lives or the length of the lease, whichever is shorter. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:
Years ----- Buildings............................................................ 20-30 Towers and antennas.................................................. 7-20 Broadcasting equipment............................................... 7-8 Furniture, fixtures, and office equipment............................ 3-7 Vehicles............................................................. 5
Asset Impairment--The individual entities within the Combined Group assess the impairment of their respective long-lived assets on a regular basis or immediately upon the occurrence of a significant event in the marketplace or an event that directly impacts such assets. The methodology varies depending on the type of asset but typically consists of comparing the net book value of the asset to either: (1) the undiscounted expected future cash flows generated by the asset, and/or (2) the current market values obtained from industry sources. If the net book value of a particular asset is materially higher than the estimated net realizable value, and the asset is considered to be permanently impaired, the radio stations will write down the net book value of the asset accordingly. The Combined Group relies on industry sources and its experience in the particular marketplace to determine whether an asset impairment is other than temporary. As of August 31, 1999, based on the opinion of management, no such impairments had occurred. Intangible Assets--Intangible assets consist of advertiser lists, favorable market area, favorable program format, permits, agreements, contracts, goodwill and organizational costs which are stated at cost, less accumulated amortization, as determined by management for WICC and by independent appraisal for WEBE. These intangible assets are being amortized over the shorter of their respective expiration dates or 40 years. F-62 WEBE AND WICC RADIO STATIONS (Divisions of ML Media Partners, L.P. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the Period January 1, 1999 to August 31, 1999 Revenue Recognition--Local and national advertising revenues are recorded when the corresponding commercial spots are aired. Barter Transactions--As is customary in the broadcasting industry, the Combined Group engages in the bartering of commercial air time for various goods and services. The goods and services are capitalized or expensed as appropriate, when received or utilized. Revenues are recognized when the commercial spots are aired. At August 31, 1999, the Combined Group had prepaid barter expense (net of deferred barter revenue) of $11,102. For the period January 1, 1999 to August 31, 1999, the Combined Group had expenses of $333,062, and revenues of $388,564, respectively, in connection with barter transactions. Cash Equivalents--Cash equivalents represent liquid investments with an original maturity of 90 days or less. Use of Estimates--The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. Allocated Borrowings On July 19, 1989, ML and Wincom Broadcasting Corporation and its wholly- owned subsidiary Win Communications, Inc. (collectively, "Wincom" which is wholly-owned by ML ) entered into an amended and restated credit, security and pledge agreement (the "Wincom-WEBE-WICC Loan") with Chemical Bank (currently doing business as Chase Manhattan Bank and subsequently referred to herein as "Chase") which was used to replace and repay other debt agreements and finance the acquisition of WICC. The Combined Group had been allocated a portion of the Wincom-WEBE-WICC Loan based on each station's percentage of broadcast cashflow to the total broadcast cashflow of Wincom Communications and WEBE and WICC. On January 28, 1999, ML paid the remaining allocated borrowings of $1,688,693 on behalf of the Combined Group and forgave the indebtedness of the Combined Group. This forgiveness of indebtedness is recorded as an extraordinary item on the combined statement of operations and accumulated earnings. The Wincom-WEBE-WICC Loan was structured as a revolving credit line that provided for borrowings of up to $35,000,000 through December 31, 1990. The Wincom-WEBE-WICC Loan converted to a term loan on December 31, 1990. Principal payments were scheduled to commence on March 31, 1991 and to continue quarterly through June 30, 1997. ML, if no event of default had occurred, had options to elect to pay interest on the Wincom-WEBE-WICC Loan based upon the bank's reference rate or London Interbank Offered Rates, plus applicable margins. As a result of defaults under the Wincom-WEBE-WICC Loan, the lender has restricted interest rate options to reference rate only. The Wincom-WEBE-WICC Loan required that the Wincom-WEBE-WICC group maintain minimum covenant levels of certain ratios such as debt to operating profit and debt service coverage, and restrict such items as: cash disbursements; the payment of management fees; distributions or dividends; additional indebtedness; or asset sales by or at Wincom, WEBE or WICC. The Wincom-WEBE-WICC Loan also included other standard and usual loan covenants. Borrowings under the Wincom-WEBE-WICC Loan were nonrecourse to ML and are collateralized with substantially all of the assets of the Wincom-WEBE-WICC Group. F-63 WEBE AND WICC RADIO STATIONS (Divisions of ML Media Partners, L.P. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the Period January 1, 1999 to August 31, 1999 On July 30, 1993, ML and Chase executed a Second Amendment to the Wincom- WEBE-WICC Loan (the "Restructuring Agreement"), effective January 1, 1993, which cured all previously outstanding defaults pursuant to the Wincom-WEBE- WICC Loan. In addition, as part of the restructuring process, ML agreed to sell substantially all of the assets of Indianapolis Stations owned by Wincom, WRZX- FM and WCKN-AM. Such sale was consummated on October 1, 1993. The Restructuring Agreement provided for the outstanding principal and interest due Chase as of December 31, 1992 (approximately $24.7 million and $2.0 million, respectively) to be divided into three notes as follows: a Series A Term Loan in the amount of $13 million; a Series B Term Loan in the amount of approximately $11.7 million; and a Series C Term Loan in the amount of approximately $2.0 million. As a result of the payment of the Series B Term Loan from the net proceeds of the sale of the Indianapolis Stations exceeding $6 million (described above), the full principal amount of the Series C Term Loan was forgiven by Chase on October 1, 1993 pursuant to the terms of the Restructuring Agreement. The Series A Term Loan was paid in full as of December 31, 1998. On January 28, 1999, the remaining principal and interest of the Series B term loan was paid in full by ML on behalf of the Combined Group and recorded as a forgiveness of indebtedness by the Combined Group. 4. Operating Leases The Combined Group leases broadcast facilities and certain other equipment under operating lease agreements. Several of the leases contain renewal options and require payment for real estate taxes and other operating costs. There were no minimum future rental commitments at August 31, 1999 under noncancelable operating leases in excess of one year. Total rent expense for the period January 1, 1999 to August 31, 1999 was $188,616. 5. Income Taxes As operating divisions of ML, WEBE and WICC are included in the tax returns of ML. ML is not subject to income taxes because all income and expenses are allocated to the individual partners of ML for inclusion in their respective tax returns. Accordingly, no income tax provision is recorded for WEBE and WICC in the accompanying combined statements of operations. 6. Related Party Transactions The payable to affiliates represents the amount payable by the Combined Group, principally to ML. ML does not assess interest to the Combined Group on its outstanding intercompany balances. The Combined Group is charged management fees by ML. These fees amounted to $1,334,216 for the period January 1, 1999 to August 31, 1999. The Combined Group also incurred corporate administrative fees to RP Radio LLC. (which took over management of the radio station in 1996). Amounts incurred for the period January 1, 1999 to August 31, 1999 were $532,500. F-64 WEBE AND WICC RADIO STATIONS (Divisions of ML Media Partners, L.P. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) For the Period January 1, 1999 to August 31, 1999 The activity in the payable to affiliates account for the period January 1, 1999 to August 31, 1999 is as follows: Balance, beginning of period................................... $5,244,248 Transfers from ML and affiliates--net.......................... 1,405,215 ---------- Balance, end of period......................................... $6,649,463 ==========
7. Fair Value of Financial Instruments SFAS No. 107, Disclosures about Fair Value of Financial Instruments, requires companies to report the fair value of certain on- and off-balance- sheet assets and liabilities which are defined as financial instruments. Assets, including cash and cash equivalents and accounts receivable, and liabilities, such as accounts payable and amounts payable to parent and affiliates, are carried at amounts which approximate fair value. 8. Subsequent Event On March 24, 2000, Aurora Communications LLC entered into an agreement to sell the assets of WEBE and WICC along with the remaining ownership interest of Aurora Communications LLC to Nassau Broadcasting Partners, L.P. for approximately $185 million, less long-term debt consisting of approximately $150 million plus an ownership interest in Nassau Broadcasting Partners, L.P. The transaction is subject to various regulatory approvals. F-65 INDEPENDENT AUDITORS' REPORT WEBE and WICC Radio Stations (Divisions of ML Media Partners, L.P.) We have audited the accompanying combined balance sheets of WEBE and WICC Radio Stations (Divisions of ML Media Partners, L.P.) (collectively, the "Combined Group") as of December 31, 1998 and 1997, and the related combined statements of operations and accumulated earnings (deficit), and cash flows for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of the Combined Group's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such combined financial statements present fairly, in all material respects, the financial position of WEBE and WICC Radio Stations (Divisions of ML Media Partners, L.P.) at December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998 in conformity with generally accepted accounting principles. Deloitte & Touche LLP New York, New York August 27, 1999 F-66 WEBE AND WICC RADIO STATIONS (Divisions of ML Media Partners, L.P.) COMBINED BALANCE SHEETS December 31, 1998 and 1997
1998 1997 ----------- ----------- ASSETS CURRENT ASSETS: Cash and cash equivalents............................ $ 3,920,462 $ 555,002 Accounts receivable--trade, less allowance for doubtful accounts of $115,841 in 1998 and $78,572 in 1997................................................ 2,203,635 1,902,249 Prepaid barter expense............................... 49,776 84,342 Other current assets................................. 28,209 21,329 ----------- ----------- Total current assets............................... 6,202,082 2,562,922 ----------- ----------- PROPERTY: Building............................................. 76,368 76,368 Towers and antennas.................................. 751,881 750,096 Broadcasting equipment............................... 1,250,000 1,314,502 Furniture, fixtures and office equipment............. 388,981 385,457 Leasehold improvements............................... 155,232 155,232 Vehicles............................................. -- 20,790 ----------- ----------- Total.............................................. 2,622,462 2,702,445 Less accumulated depreciation and amortization....... 2,521,037 2,597,617 ----------- ----------- PROPERTY--Net.......................................... 101,425 104,828 ----------- ----------- OTHER ASSETS: Goodwill............................................. 14,777,376 14,777,376 Other intangible assets.............................. 761,624 761,624 ----------- ----------- Total.............................................. 15,539,000 15,539,000 Less accumulated amortization........................ 4,356,407 3,972,745 ----------- ----------- OTHER ASSETS--Net...................................... 11,182,593 11,566,255 ----------- ----------- TOTAL ASSETS........................................... $17,486,100 $14,234,005 =========== =========== LIABILITIES AND DIVISIONAL EQUITY CURRENT LIABILITIES: Accounts payable..................................... $ 31,278 $ 15,982 Deferred barter revenue.............................. 94,175 147,207 Accrued liabilities--other........................... 327,920 450,736 Payable to affiliates................................ 1,688,693 2,874,228 ----------- ----------- Total current liabilities.......................... 2,142,066 3,488,153 ----------- ----------- COMMITMENTS (Note 4) DIVISIONAL EQUITY: Division capital..................................... 4,500,000 4,500,000 Payable to affiliates................................ 5,244,248 4,869,581 Accumulated earnings................................. 5,599,786 1,376,271 ----------- ----------- Total.............................................. 15,344,034 10,745,852 ----------- ----------- TOTAL LIABILITIES AND DIVISIONAL EQUITY................ $17,486,100 $14,234,005 =========== ===========
See notes to combined financial statements. F-67 WEBE AND WICC RADIO STATIONS (Divisions of ML Media Partners, L.P.) COMBINED STATEMENTS OF OPERATIONS AND ACCUMULATED EARNINGS (DEFICIT) Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996 ----------- ----------- ----------- REVENUE: Local................................ $ 9,496,654 $ 9,063,957 $ 7,467,180 National............................. 2,777,925 2,194,956 1,753,774 Trades............................... 445,752 614,201 572,519 Other................................ 571,863 426,240 443,473 ----------- ----------- ----------- Total.............................. 13,292,194 12,299,354 10,236,946 Less commissions of agencies......... 1,632,323 1,478,419 1,223,346 ----------- ----------- ----------- NET REVENUE............................ 11,659,871 10,820,935 9,013,600 ----------- ----------- ----------- OPERATING EXPENSES BEFORE DEPRECIATION AND AMORTIZATION: Direct............................... 602,410 590,407 494,376 Technical............................ 240,970 231,854 247,733 Programming.......................... 990,498 994,339 816,721 News................................. 259,388 248,508 273,873 Selling.............................. 2,052,515 1,994,603 1,701,447 Promotion............................ 610,757 717,685 455,956 General and administrative........... 1,334,684 1,401,451 1,337,873 Corporate administrative............. 271,218 298,284 327,868 Management fee....................... 450,488 1,068,552 650,965 ----------- ----------- ----------- Total.............................. 6,812,928 7,545,683 6,306,812 ----------- ----------- ----------- OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION...................... 4,846,943 3,275,252 2,706,788 DEPRECIATION AND AMORTIZATION.......... (410,373) (538,887) (561,945) ----------- ----------- ----------- OPERATING INCOME....................... 4,436,570 2,736,365 2,144,843 INTEREST EXPENSE....................... (213,055) (204,363) (458,369) ----------- ----------- ----------- NET INCOME............................. 4,233,515 2,532,002 1,686,474 ACCUMULATED EARNINGS (DEFICIT), BEGINNING OF YEAR..................... 1,376,271 (1,155,731) (2,842,205) ----------- ----------- ----------- ACCUMULATED EARNINGS (DEFICIT), END OF YEAR.................................. $ 5,599,786 $ 1,376,271 $(1,155,731) =========== =========== ===========
See notes to combined financial statements. F-68 WEBE AND WICC RADIO STATIONS (Divisions of ML Media Partners, L.P.) COMBINED STATEMENTS OF CASH FLOWS Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996 ---------- ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income............................... $4,223,515 $2,532,002 $1,686,474 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation........................... 26,711 95,760 118,104 Amortization........................... 383,662 443,127 443,841 Bad debt expense....................... 56,026 45,336 64,633 Changes in operating assets (increase) decrease: Accounts receivable.................. (357,412) (248,784) (269,555) Prepaid barter expense............... 34,566 43,014 (126,011) Other current assets................. (6,880) 18,937 (9,605) Changes in operating liabilities increase (decrease): Accounts payable and other accrued liabilities......................... (107,519) (116,776) (40,514) Deferred barter revenue.............. (53,032) 22,766 124,258 ---------- ---------- ---------- Net cash provided by operating activities........................ 4,199,637 2,835,382 1,991,625 ---------- ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES-- Capital expenditures..................... (23,309) (29,663) (16,419) ---------- ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES-- Net decrease in payable to parent and affiliates.............................. (810,868) (3,135,510) (1,332,044) ---------- ---------- ---------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................... 3,365,460 (329,791) 643,162 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR...................................... 555,002 884,793 241,631 ---------- ---------- ---------- CASH AND CASH EQUIVALENTS, END OF YEAR..... $3,920,462 $ 555,002 $ 884,793 ========== ========== ==========
See notes to combined financial statements. F-69 WEBE AND WICC RADIO STATIONS (Divisions of ML Media Partners, L.P.) NOTES TO COMBINED FINANCIAL STATEMENTS Years Ended December 31, 1988, 1997 and 1996 1. ORGANIZATION, OWNERSHIP AND OPERATIONS WEBE and WICC radio stations (collectively, the "Combined Group") are divisions of ML Media Partners, L.P. ("ML"). Both of the radio stations are located in Fairfield County, Connecticut. Based upon regular assessments of the Combined Group's operations performed by key management, the Combined Group has determined that is reportable segment is commercial radio broadcasting. The economic characteristics, services, production process, customer type and distribution methods for the Combined Group's two radio statements are substantially similar and have therefore been aggregated as one reportable segment. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Combination--The accompanying combined financial statements include the accounts of the Combined Group. All significant intercompany balances and transactions have been eliminated in combination. Property--Property is stated at cost less accumulated depreciation and amortization. Leasehold improvements are amortized over their estimated useful lives or the length of the lease, whichever is shorter. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:
Years ----- Buildings............................................................ 20-30 Towers and antennas.................................................. 7-20 Broadcasting equipment............................................... 7-8 Furniture, fixtures, and office equipment............................ 3-7 Vehicles............................................................. 5
Asset Impairment--The individual entities within the Combined Group assess the impairment of their respective long-lived assets on a regular basis or immediately upon the occurrence of a significant event in the marketplace or an event that directly impacts such assets. The methodology varies depending on the type of asset but typically consists of comparing the net book value of the asset to either: (1) the undiscounted expected future cash flows generated by the asset, and/or (2) the current market values obtained from industry sources. If the net book value of a particular asset is materially higher than the estimated net realizable value, and the asset is considered to be permanently impaired, the radio stations will write down the net book value of the asset accordingly. The Combined Group relies on industry sources and its experience in the particular marketplace to determine whether an asset impairment is other than temporary. As of December 31, 1998, based on the opinion of management, no such impairments had occurred. Intangible Assets--Intangible assets consist of advertiser lists, favorable market area, favorable program format, permits, agreements, contracts, goodwill and organizational costs which are stated at cost, less accumulated amortization, as determined by management for WICC and by independent appraisals for WEBE. These intangible assets are being amortized over the shorter of their respective expiration dates for 40 years. Revenue Recognition--Local and national advertising revenues are recorded when the corresponding commercials spots are aired. F-70 WEBE AND WICC RADIO STATIONS (Divisions of ML Media Partners, L.P.) NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) Years Ended December 31, 1998, 1997 and 1996 Barter Transactions--As is customary in the broadcasting industry, the Combined Group engages in the bartering of commercial air time for various goods and services. The goods and services are capitalized or expensed as appropriate, when received or utilized. Revenues are recognized when the commercial spots are aired. At December 31, 1998 and 1997, the Combined Group had deferred barter revenue (net of prepaid barter expense) of $44,399 and $62,865, respectively. During 1998, 1997 and 1996 the Combined Group had expenses of $424,287, $676,288 and $597,548, respectively, and revenues of $445,752, $614,201 and $572,519, respectively, in connection with barter transactions. Cash Equivalents--Cash equivalents represent liquid investments with an original maturity of 90 days or less. Use of Estimates--The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. ALLOCATED BORROWINGS On July 19, 1989, ML and Wincom Broadcasting Corporation and its wholly- owned subsidiary Win Communications, Inc. (collectively, "Wincom" which is wholly-owned by ML) entered into an amended and restated credit, security and pledge agreement (the "Wincom-WEBE-WICC Loan") with Chemical Bank (currently doing business as Chase Manhattan Bank and subsequently referred to herein as "Chase") which was used to replace and repay other debt agreements and finance the acquisition of WICC. The Combined Group has been allocated a portion of the Wincom-WEBE-WICC Loan based on each station's percentage of broadcast cashflow to the total broadcast cash flow of Wincom Communications and WEBE and WICC. The Combined Group's allocated portion of the related obligations was $1,688,693 and $2,874,228 at December 31, 1998 and 1997, respectively and is included in payable to affiliates--current on the combined balance sheets. The Wincom-WEBE-WICC Loan was structured as a revolving credit line that provided for borrowings of up to $35,000,000 through December 31, 1990. The Wincom-WEBE-WICC Loan converted to a term loan on December 31, 1990. Principal payments were scheduled to commence on March 31, 1991 and to continue quarterly through June 30, 1997. ML, if no event of default had occurred, had options to elect to pay interest on the Wincom-WEBE-WICC Loan based upon the bank's reference rate or London Interbank Offered Rates, plus applicable margins. As a result of defaults under the Wincom-WEBE-WICC Loan, the lender has restricted interest rate options to reference rate only. The Wincom-WEBE-WICC Loan required that the Wincom-WEBE-WICC group maintain minimum covenant levels of certain ratios such as debt to operating profit and debt service coverage, and restrict such items as: cash disbursements; the payment of management fees; distributions or dividends; additional indebtedness; or asset sales by or at Wincom, WEBE or WICC. The Wincom-WEBE-WICC Loan also included other standard and usual loan covenants. Borrowings under the Wincom-WEBE-WICC Loan were nonrecourse to ML and are collateralized with substantially all of the assets of the Wincom-WEBE-WICC Group. On July 30, 1993, ML and Chase executed a Second Amendment to the Wincom- WEBE-WICC Loan (the "Restructuring Agreement"), effective January 1, 1993, which cured all previously outstanding defaults F-71 WEBE AND WICC RADIO STATIONS (Divisions of ML Media Partners, L.P.) NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) Years Ended December 31, 1998, 1997 and 1996 pursuant to the Wincom-WEBE-WICC Loan. In addition, as part of the restructuring process, ML agreed to sell substantially all of the assets of Indianapolis Stations owned by Wincom, WRZX-FM and WCKN-AM. Such sale was consummated on October 1, 1993. The Restructuring Agreement provided for the outstanding principal and interest due Chase as of December 31, 1992 (approximately $24.7 million and $2.0 million, respectively) to be divided into three notes as follows: a Series A Term Loan in the amount of $13 million; a Series B Term Loan in the amount of approximately $11.7 million; and a Series C Term Loan in the amount of approximately $2.0 million. As a result of the payment of the Series B Term Loan from the net proceeds of the sale of the Indianapolis Stations exceeding $6 million (described above), the full principal amount of the Series C Term Loan was forgiven by Chase on October 1, 1993 pursuant to the terms of the Restructuring Agreement. The Series A Term Loan was paid in full as of December 31, 1998. On January 28, 1999, the remaining principal and interest of the Series B term loan was paid in full. The Combined Group's allocated portion of this loan is included in payable to affiliates - current on the combined balances sheets. 4. OPERATING LEASES The Combined Group leases broadcast facilities and certain other equipment under operating lease agreements. Several of the leases contain renewal options and require payment for real estate taxes and other operating costs. Minimum future rental commitments at December 31, 1998 under all noncancelable operating leases in excess of one year, are as follows:
Year Amount ---- -------- 1999.............................................................. $205,656 ========
Total rent expense for the years ended December 31, 1998, 1997 and 1996 was $210,906, $256,902 and $355,232, respectively. 5. INCOME TAXES As operating divisions of ML, WEBE, and WICC are included in the tax returns of ML. ML is not subject to income taxes because all income and expenses are allocated to the individual partners of ML for inclusion in their respective tax returns. Accordingly, no income tax provision is recorded for WEBE and WICC in the accompanying combined statements of operations. 6. RELATED PARTY TRANSACTIONS The payable to affiliates represents the amount payable by the Combined Group, principally to ML. ML does not assess interest to the Combined Group on its outstanding intercompany balances. The Combined Group is charged management fees by ML. These fees amounted to $450,488, $1,068,552 and $650,965 in 1998, 1997 and 1996, respectively. The Combined Group also incurred corporate F-72 WEBE AND WICC RADIO STATIONS (Divisions of ML Media Partners, L.P.) NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) Years Ended December 31, 1998, 1997 and 1996 administrative fees to RP Radio LLC., (which took over management of the radio station in 1996). Amounts incurred in 1998, 1997 and 1996 were $271,218, $298,284 and $327,868, respectively. The activity in the payable to affiliates account for the years ended December 31, 1998, 1997, and 1996 is as follows:
1998 1997 1996 ---------- ---------- ---------- Balance, beginning of year............... $4,869,581 $3,579,610 $3,044,486 Transfers from ML and affiliates--net.... 374,667 1,289,971 535,124 ---------- ---------- ---------- Balance, end of year..................... $5,244,248 $4,869,581 $3,579,610 ========== ========== ==========
7. FAIR VALUE OF FINANCIAL INSTRUMENTS SFAS No. 107, Disclosures about Fair Value of Financial Instruments, requires companies to report the fair value of certain on- and off-balance- sheet assets and liabilities which are defined as financial instruments. Assets, including cash and cash equivalents and accounts receivable, and liabilities, such as accounts payable and amounts payable to parent and affiliates, are carried at amounts which approximate fair value. 8. SUBSEQUENT EVENT On April 22, 1999, ML Media Partners L.P. entered into an asset purchase agreement to sell the assets of WEBE and WICC for $66 million. The effective closing date for this transaction is August 31, 1999. F-73 INDEPENDENT AUDITORS' REPORT To the Trustee Capstar Trust We have audited the accompanying balance sheet of Capstar Trust (a trust) as of October 26, 1999, and the related statements of operations and beneficiaries' equity and cash flows for the period of January 1, 1999 to October 26, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Capstar Trust as of October 26, 1999, and the results of its operations and its cash flows for the period of January 1, 1999 to October 26, 1999 in conformity with generally accepted accounting principles. Weeks Holderbaum Huber & DeGraw LLP Bridgewater, New Jersey January 21, 2000 F-74 CAPSTAR TRUST BALANCE SHEET October 26, 1999 ASSETS Current Assets: Cash and cash equivalents....................................... $ 567,697 Accounts receivable, less allowance for doubtful accounts of $71,838........................................................ 585,355 Other current assets............................................ 31,350 ------------ Total Current Assets.......................................... 1,184,402 Property, Plant and Equipment--Net................................ 1,943,749 Intangible Assets--Net............................................ 7,464,336 Security Deposits................................................. 2,005 ------------ Total assets...................................................... $ 10,594,492 ============ LIABILITY AND BENEFICIARIES' EQUITY Current Liability: Accounts payable and accrued expenses........................... $ 247,834 Beneficiaries' Equity........................................... 10,346,658 ------------ Total liabilities and beneficiaries' equity................... $ 10,594,492 ============
The Notes to Financial Statements are an Integral Part of this Statement F-75 CAPSTAR TRUST STATEMENT OF OPERATIONS AND BENEFICIARIES' EQUITY For the period of January 1, 1999 to October 26, 1999 Revenues: Broadcast revenue................................................ $ 3,578,756 Less: agency commissions......................................... (249,121) ----------- Net Broadcast Revenue.......................................... 3,329,635 Other Non-broadcast Revenue...................................... 7,734 ----------- Total Revenue.................................................. 3,337,369 Expenses: Programming and technical........................................ 638,370 Sales and advertising............................................ 1,096,967 Administrative................................................... 640,153 ----------- Total Expenses................................................. 2,375,490 ----------- Income from Operations............................................. 961,879 Other (Income) Expenses: Depreciation..................................................... 144,592 Amortization..................................................... 172,174 Other expenses................................................... 47,693 Interest income.................................................. (13,731) ----------- Total Other (Income) Expenses.................................. 350,728 ----------- Net Income......................................................... 611,151 Beneficiaries' Equity at Beginning of Period....................... 10,485,507 Distributions to Beneficiary....................................... (750,000) ----------- Beneficiaries' Equity at End of Period............................. $10,346,658 ===========
The Notes to Financial Statements are an Integral Part of this Statement F-76 CAPSTAR TRUST STATEMENT OF CASH FLOWS For the period of January 1, 1999 to October 26, 1999 Cash Flows From Operating Activities: Net income....................................................... $ 611,151 Adjustments to Reconcile Net income to Net Cash Provided by Operating Activities: Depreciation and amortization.................................... 316,766 Bad debt (recovery).............................................. (41,519) Increase in accounts receivable.................................. (74,106) Decrease in other current asset.................................. 6,553 Increase in accounts payable..................................... 158,874 --------- Total Adjustments.............................................. 366,568 --------- Net cash provided by operating activities.......................... 977,719 Cash Flows From Investing Activities: Purchase of property and equipment............................... (159,953) Cash Flows from Financing Activities: Distributions to beneficiary..................................... (750,000) --------- Net Increase in Cash and Cash Equivalents.......................... 67,766 Cash and Cash Equivalents at Beginning of Period................... 499,931 --------- Cash and Cash Equivalents at End of Period......................... $ 567,697 =========
The Notes to Financial Statements are an Integral Part of this Statement F-77 CAPSTAR TRUST NOTES TO FINANCIAL STATEMENTS NOTE 1--SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Business Capstar Trust (the Company) operates several radio stations in Putnam County, New York and Fairfield County, Connecticut. The Company commenced operations on May 29, 1999 upon the contribution of the assets by the Grantor. The sole assets and operations of the Company are limited to the operation of the four radio stations contributed by the Grantor. The stations are known by the call letters of WRKI-FM, WAXB-FM, WINE-AM and WPUT-AM. The Company derives its revenue primarily from the sale of radio advertising. Contribution of Assets On May 29, 1999, Capstar Broadcasting Corporation (the Grantor) contributed all of the rights, title, interest and obligations in all of the assets, properties, contracts, leases and agreements of four radio stations known by the call letters WRKI, WAXB, WPUT and WINE to the Company. Revenue Recognition Broadcasting operations derive revenue primarily from the sale of program time and commercial announcements to local, regional and national advertisers. Revenue is recognized when the program and commercial announcements are broadcast. Advertising Costs The Company incurs various marketing and promotional costs to add and maintain listenership. These are expensed as incurred. Use of Estimates The process of preparing financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from those estimates. Concentration of Credit Risk The Company maintains balances in a money market fund. Such balances are not FDIC insured. The Company periodically maintains cash balances in excess of the FDIC insurance limit in its financial institution. The radio broadcasting industry is subject to federal regulation by the Federal Communications Commission. These governmental regulations and policies could change over time and there can be no assurance that such changes would not have a material impact upon the Company. The Company's revenue and accounts receivable primarily relates to advertising of products and services within the radio stations' broadcast areas. The Company performs ongoing credit evaluations of its F-78 CAPSTAR TRUST NOTES TO FINANCIAL STATEMENTS--(Continued) customers' financial condition and, generally requires no collateral from its customers. Credit losses have been within management's expectations and adequate allowances for any uncollectible accounts receivable are maintained. Property and Equipment The cost of property and equipment is depreciated over the estimated useful lives of the related assets. Leasehold improvements are depreciated over the lesser of the term of the related lease or the estimated useful lives of the assets. Depreciation is computed on the straight-line method for financial reporting purposes and double declining balance method for income tax purposes. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations. The useful lives of property and equipment for purposes of computing depreciation are: Office equipment.............................................. 3-7 years Studio equipment.............................................. 7-10 years Leasehold improvements........................................ 10-20 years Buildings and broadcast tower................................. 20 years
Income Taxes The Company is treated as a grantor trust for tax purposes. Accordingly, the items of income, loss and credit are taxed directly to the beneficiary. Cash Flows For purposes of the statement of cash flows, cash equivalents include time deposits, certificates of deposits, and all highly liquid debt instruments with original maturities of three months or less. There were no cash payments for interest and income taxes. Barter Transactions The Company barters unsold advertising time for products and services. Such transactions are recorded at the estimated fair value of the products or services received. Barter revenue is recorded when commercials are broadcast, and related expenses are recorded when the bartered product or service is used. The fair value of barter and trade-out transactions is included in broadcasting revenue and broadcasting expense. Barter transactions charged to operations were as follows: Trade sales....................................................... $ 484,938 Trade expense..................................................... (526,372) --------- Net Trade Out................................................... $ (41,434) =========
F-79 CAPSTAR TRUST NOTES TO FINANCIAL STATEMENTS--(Continued) NOTE 2--PROPERTY, PLANT AND EQUIPMENT Property and equipment consisted of the following at October 26, 1999: Land, building and improvements.................................. $ 999,636 Vehicles......................................................... 3,290 Studio and transmission equipment................................ 1,206,141 Office equipment and fixtures.................................... 193,599 ---------- Total.......................................................... 2,402,666 Less: accumulated depreciation (458,917) ---------- Net Property and Equipment....................................... $1,943,749 ==========
Depreciation expense changed to operations amounted to $144,592 for the period. NOTE 3--INTANGIBLE ASSETS Intangible assets consisted of the following at October 26, 1999:
Amortization Period ------------ FCC license......................................... 40 years $8,003,448 Goodwill............................................ 40 years 32,000 Favorable lease..................................... 9 years 56,108 -------- ---------- Total............................................... 8,091,556 Less: accumulated amortization...................... (627,220) -------- ---------- Net Intangible Assets............................... $7,464,336 ======== ==========
Amortization expense changed to operations amounted to $172,174 for the period. The Company periodically evaluates intangible assets for potential impairment by analyzing the operating results, future cash flows on an undiscounted basis, trends and prospects of the Company's stations, as well as by comparing them to their competitors. The Company also takes into consideration recent acquisition patterns within the broadcast industry, the impact of recently enacted or potential FCC rules and regulations and any other events or circumstances which might indicate potential impact. At this time, in the opinion of management, no impairment has occurred. NOTE 4--COMMITMENTS Operating Leases The Company leases office equipment under an operating lease expiring in 2003. The Company also leases various tower facilities under operating leases which do not currently have a definitive expiration date. F-80 CAPSTAR TRUST NOTES TO FINANCIAL STATEMENTS--(Continued) The Company also contracts for a variety of services and equipment through short term agreements and leases under cash or barter arrangements. These agreements and leases are renewed or replaced at the end of their term at the discretion of management. Minimum future rentals under noncancelable operating leases having remaining terms in excess of one year for each of the next five years and in the aggregate are as follows: Year ended October 26, 2000............................................................ $ 233,765 2001............................................................ 144,928 2002............................................................ 141,832 2003............................................................ 150,066 2004............................................................ 50,793 --------- Total Minimum Lease Payments.................................. $ 721,384 =========
NOTE 6--PENSION PLAN The Company has a 401(k) Profit Sharing Plan covering all full time employees meeting eligibility requirements. The Company matches fifty percent of the employees contributions up to six percent of compensation. For the period ended October 26, 1999, the Company contributed $14,148. NOTE 7--SUBSEQUENT SALE OF CAPSTAR TRUST On October 27, 1999, the assets, excluding cash, and equivalents, and accounts receivable, of the Capstar Trust were purchased by Aurora Communications, LLC. The gross proceeds from the sale were $11,273,787. F-81 INDEPENDENT AUDITORS' REPORT To the Trustee Capstar Trust We have audited the accompanying balance sheet of Capstar Trust (a trust) as of December 31, 1998, and the related statements of operations and beneficiaries' equity and cash flows for the period May 29, 1998 (date of inception) to December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Capstar Trust as of December 31, 1998, and the results of its operations and its cash flows for the period of May 29, 1998 (date of inception) to December 31, 1998 in conformity with generally accepted accounting principles. Weeks Holderbaum Huber & DeGraw LLP Bridgewater, New Jersey February 11, 1999 (except for Note 6, as to which the date is October 27, 1999) F-82 CAPSTAR TRUST BALANCE SHEET December 31, 1998 ASSETS Current Assets: Cash and cash equivalents........................................ $ 499,931 Accounts receivable, less allowance for doubtful accounts of $113,357........................................................ 469,730 Other current assets............................................. 37,903 ----------- Total Current Assets........................................... 1,007,564 Property, Plant and Equipment--Net................................. 1,927,705 Intangible Assets--Net............................................. 7,637,193 Security Deposits.................................................. 2,005 ----------- TOTAL ASSETS..................................................... $10,574,467 =========== LIABILITY AND BENEFICIARIES' EQUITY Current Liability: Accounts payable and accrued expenses............................ 88,960 Beneficiaries' Equity............................................ 10,485,507 ----------- TOTAL LIABILITIES AND BENEFICIARIES' EQUITY.................... $10,574,467 ===========
The Notes to Financial Statements are an Integral Part of this Statement F-83 CAPSTAR TRUST STATEMENT OF OPERATIONS AND BENEFICIARIES' EQUITY For the period of May 29, 1998 (date of inception) to December 31, 1998 Revenues: Broadcast revenue................................................ $ 2,329,270 Less: agency commissions......................................... (155,879) ----------- Net Broadcast Revenue.......................................... 2,173,391 Other Non-broadcast Revenue...................................... 6,016 Total Revenue.................................................. 2,179,407 Expenses: Programming and technical........................................ 398,393 Sales and advertising............................................ 807,306 Administrative................................................... 420,998 ----------- Total Expenses................................................. 1,626,697 ----------- Income from Operations............................................. 552,710 Other (Income) Expenses: Corporate Expense................................................ 33,112 Depreciation..................................................... 87,606 Amortization..................................................... 121,236 Interest income.................................................. (8,348) ----------- Total Other (Income) Expenses.................................. 233,606 ----------- Net Income......................................................... 319,104 Beneficiaries' Equity at Beginning of Period....................... -- Contributed Capital................................................ 10,416,403 Distributions to Beneficiary....................................... (250,000) ----------- Beneficiaries' Equity at End of Period............................. $10,485,507 ===========
The Notes to Financial Statements are an Integral Part of this Statement F-84 CAPSTAR TRUST STATEMENT OF CASH FLOWS For the period May 29, 1998 (date of inception) to December 31, 1998 Cash Flows From Operating Activities: Net income....................................................... $ 319,104 Adjustments to Reconcile Net income to Net Cash Provided by Operating Activities: Depreciation and amortization.................................. 208,842 Bad debt provision (recovery).................................. 20,009 Decrease in accounts receivable................................ 173,358 Increase in other current assets............................... (22,785) Payment of security deposits................................... (380) Increase in accounts payable................................... 88,960 ----------- Total Adjustments............................................ 468,004 ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES.................... 787,108 Cash Flows From Investing Activities: Organization costs............................................. (3,442) Purchase of property and equipment............................. (34,535) ----------- NET CASH USED BY INVESTING ACTIVITIES........................ (37,977) Cash Flows from Financing Activities: Payment of distribution to beneficiary......................... (250,000) ----------- Net Increase in Cash and Cash Equivalents...................... 499,131 Cash and Cash Equivalents at Beginning of Period............... 800 ----------- Cash and Cash Equivalents at End of Period..................... $ 499,931 =========== Summary of Noncash Financing Activities: Contribution of assets by grantor.............................. $10,416,403 ===========
The Notes to Financial Statements are an Integral Part of this Statement F-85 CAPSTAR TRUST NOTES TO FINANCIAL STATEMENTS NOTE 1--SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Business Capstar Trust (the Company) operates several radio stations in Putnam County, New York and Fairfield County, Connecticut. The Company commenced operations on May 29, 1998 upon the contribution of the assets by the grantor. The sole assets and operations of the Company are limited to the operation of the four radio stations contributed by the Grantor. The stations are known by the call letters of WRKI-FM, WAXB-FM, WINE-AM and WPUT-AM. The Company derives its revenue primarily from the sale of radio advertising. Contribution of Assets On May 29, 1998, Capstar Broadcasting Corporation (the Grantor) contributed all of the rights, title, interest and obligations in all of the assets, properties, contracts, leases and agreements of four radio stations known by the call letters WRKI, WAXB, WPUT and WINE to the Company. Revenue Recognition Broadcasting operations derive revenue primarily from the sale of program time and commercial announcements to local, regional and national advertisers. Revenue is recognized when the program and commercial announcements are broadcast. Advertising Costs The Company incurs various marketing and promotional costs to add and maintain listenership. These are expensed as incurred. Use of Estimates The process of preparing financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from those estimates. Concentration of Credit Risk The Company maintains balances in a money market fund. Such balances are not FDIC insured. The Company periodically maintains cash balances in excess of the FDIC insurance limit in its financial institution. The radio broadcasting industry is subject to federal regulation by the Federal Communications Commission. These governmental regulations and policies could change over time and there can be no assurance that such changes would not have a material impact upon the Company. The Company's revenue and accounts receivable primarily relates to advertising of products and services within the radio stations' broadcast areas. The Company performs ongoing credit evaluations of its customers' financial condition and, generally requires no collateral from its customers. Credit losses have been F-86 CAPSTAR TRUST NOTES TO FINANCIAL STATEMENTS--(Continued) within management's expectations and adequate allowances for any uncollectible accounts receivable are maintained. Property and Equipment The cost of property and equipment is depreciated over the estimated useful lives of the related assets. Leasehold improvements are depreciated over the lesser of the term of the related lease or the estimated useful lives of the assets. Depreciation is computed on the straight-line method for financial reporting purposes and double declining balance method for income tax purposes. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations. The useful lives of property and equipment for purposes of computing depreciation are: Office equipment................................................. 3-7 years Studio equipment................................................. 7-10 years Leasehold improvements........................................... 10-20 years Buildings and broadcast tower.................................... 20 years
Income Taxes The Company is treated as a grantor trust for tax purposes. Accordingly, the items of income, loss and credit are taxed directly to the beneficiary. Cash Flows For purposes of the statement of cash flows, cash equivalents include time deposits, certificates of deposits, and all highly liquid debt instruments with original maturities of three months or less. Cash paid for interest and income taxes are as follows: Interest............................................................... $ -- Income taxes........................................................... --
Barter Transactions The Company barters unsold advertising time for products and services. Such transactions are recorded at the estimated fair value of the products or services received. Barter revenue is recorded when commercials are broadcast, and related expenses are recorded when the bartered product or service is used. The fair value of barter and trade-out transactions is included in broadcasting revenue and broadcasting expense. Barter transactions charged to operations were as follows: Trade sales....................................................... $ 359,909 Trade expense..................................................... (423,317) --------- Net Trade Out................................................... $ (63,408) =========
F-87 CAPSTAR TRUST NOTES TO FINANCIAL STATEMENTS--(Continued) NOTE 2--PROPERTY, PLANT AND EQUIPMENT Property and equipment consisted of the following at December 31, 1998: Land, building and improvements.................................. $ 992,917 Vehicles......................................................... 3,290 Studio and transmission equipment................................ 1,124,535 Office equipment and fixtures.................................... 121,971 ---------- Total.......................................................... 2,242,713 Less: accumulated depreciation................................... (315,008) ---------- Net Property and Equipment....................................... $1,927,705 ==========
Depreciation charged to operations amounted to $87,606. NOTE 3--INTANGIBLE ASSETS Intangible assets consisted of the following at December 31, 1998: FCC license...................................................... $8,003,448 Goodwill......................................................... 32,000 Favorable lease.................................................. 56,108 Organization costs............................................... 3,442 ---------- Total.......................................................... 8,094,998 Less: accumulated amortization................................... (457,805) ---------- $7,637,193 ==========
Amortization charged to operations amount to $121,236. The Company periodically evaluates intangible assets for potential impairment by analyzing the operating results, future cash flows on an undiscounted basis, trends and prospects of the Company's stations, as well as by comparing them to their competitors. The Company also takes into consideration recent acquisition patterns within the broadcast industry, the impact of recently enacted or potential FCC rules and regulations and any other events or circumstances which might indicate potential impact. At this time, in the opinion of management, no impairment has occurred. NOTE 4--COMMITMENTS Operating Leases The Company leases office equipment under an operating lease expiring in 2003. The Company also leases various tower facilities under operating leases which do not currently have a definitive expiration date. F-88 CAPSTAR TRUST NOTES TO FINANCIAL STATEMENTS--(Continued) The Company also contracts for a variety of services and equipment through short term agreements and leases under cash or barter arrangements. These agreements and leases are renewed or replaced at the end of their term at the discretion of management. Minimum future rentals under noncancelable operating leases having remaining terms in excess of one year for each of the next five years and in the aggregate are as follows: Year ended December 31, 1999............................................................ $ 40,427 2000............................................................ 41,017 2001............................................................ 42,029 2002............................................................ 43,094 2003............................................................ 43,605 -------- Total Minimum Lease Payments.................................. $210,172 ========
NOTE 5--PENSION PLAN The Company has a 401(k) Profit Sharing Plan covering all full time employees meeting eligibility requirements. The Company matches fifty percent of the employees contributions up to six percent of compensation. For the period ended December 31, 1998, the Company contributed $4,650. NOTE 6--SUBSEQUENT SALE OF CAPSTAR TRUST On October 27, 1999, the tangible assets, FCC license and goodwill of Capstar Trust were purchased by Aurora of Danbury, L.L.C. The total cost of the acquisition was $11,250,000. F-89 INDEPENDENT AUDITORS' REPORT To the Members Westchester Radio, LLC We have audited the accompanying balance sheet of Westchester Radio, LLC (a limited liability company) as of October 26, 1999, and the related statements of operations and members' deficiency and cash flows for the period of January 1, 1999 to October 26, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Westchester Radio, LLC as of October 26, 1999, and the results of its operations and its cash flows for the period of January 1, 1999 to October 26, 1999 in conformity with generally accepted accounting principles. Weeks Holderbaum Huber & DeGraw LLP Bridgewater, New Jersey January 4, 2000 F-90 WESTCHESTER RADIO, LLC BALANCE SHEET October 26, 1999 ASSETS CURRENT ASSETS: Cash and cash equivalents...................................... $ 256,496 Accounts receivable, less allowance for doubtful accounts of $55,000....................................................... 836,822 Other current assets........................................... 20,428 ------------ Total current assets......................................... 1,113,746 PROPERTY, PLANT AND EQUIPMENT--NET............................... 2,440,304 Intangible assets--net......................................... 18,178,136 Security deposits.............................................. 7,732 ------------ Total assets................................................. $ 21,739,918 ============ LIABILITY AND MEMBERS' DEFICIENCY CURRENT LIABILITIES: Current maturities of long-term debt........................... $ 1,963,873 Accounts payable and accrued expenses.......................... 406,761 ------------ Total current liabilities.................................... 2,370,634 LONG-TERM DEBT................................................... 38,167,660 MEMBERS' DEFICIENCY.............................................. (18,798,376) ------------ TOTAL LIABILITIES AND MEMBERS' DEFICIENCY.................... $ 21,739,918 ============
The Notes to Financial Statements are an Integral Part of this Statement F-91 WESTCHESTER RADIO, LLC STATEMENT OF OPERATIONS AND MEMBERS' DEFICIENCY For the Period of January 1, 1999 to October 26, 1999 Revenues: Broadcast revenue.............................................. $ 4,228,178 Less: agency commissions....................................... (396,621) ------------ Net broadcast revenue........................................ 3,831,557 Other non broadcast revenue...................................... 120,071 ------------ Total revenue................................................ 3,951,628 Expenses: Programming and technical...................................... 623,392 Sales and advertising.......................................... 1,133,766 Administrative................................................. 899,211 ------------ Total expenses............................................... 2,656,369 ------------ Income from operations........................................... 1,295,259 Other (income) expenses: Partnership administration..................................... 204,584 Depreciation................................................... 124,838 Amortization................................................... 783,090 Loss on impairment of intangible assets........................ 13,250,000 Interest expense............................................... 3,376,846 Interest income................................................ (6,851) ------------ Total other (income) expenses................................ 17,732,507 ------------ NET LOSS..................................................... (16,437,248) Members' deficiency at beginning of period....................... (2,361,128) ------------ Members' deficiency at end of period............................. $(18,798,376) ============
The Notes to Financial Statements are an Integral Part of this Statement F-92 WESTCHESTER RADIO, LLC STATEMENT OF CASH FLOWS For the Period of January 1, 1999 to October 26, 1999 Cash flows from operating activities: Net loss........................................................ $(16,437,248) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization................................. 907,928 Loss on impairment of intangible assets....................... 13,250,000 Noncash interest accrued on long-term obligations............. 1,740,921 Decrease in accounts receivable............................... 135,340 Decrease in other current assets.............................. 25,590 Increase in accounts payable.................................. 97,699 Recovery of security deposits................................. 695 ------------ Total adjustments........................................... 16,158,173 ------------ Net cash used by operating activities....................... (279,075) Cash flows from investing activities: Purchase of property and equipment............................ (81,496) Cash flows from financing activities: Proceeds from member loans.................................... 1,359,548 Repayment of bank loans....................................... (937,500) Principle payments on installment obligation.................. (2,952) ------------ Net cash provided by financing activities................... 419,096 NET INCREASE IN CASH AND CASH EQUIVALENTS................... 58,525 Cash and cash equivalents at beginning of period................ 197,971 ------------ Cash and cash equivalents at end of period...................... $ 256,496 ============
The Notes to Financial Statements are an Integral Part of this Statement F-93 WESTCHESTER RADIO, LLC NOTES TO FINANCIAL STATEMENTS NOTE 1--SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Business Westchester Radio, LLC (the Company) operates several radio stations in Westchester County, New York. The Company commenced operations on April 2, 1998 with the contribution of the assets of WFAS-FM, WFAS-AM and WZZN-FM from Commodore Media of Westchester, Inc. The assets and operations of the Company were solely comprised from WFAS-FM; WFAS-AM and WZZN-FM. The Company derives its revenue primarily from the sale of radio advertising. Acquisition of Assets On April 2, 1998, the Company acquired the net assets and FCC license of WFAS-FM, WFAS-AM and WZZN-FM (the Stations) from Commodore Media of Westchester, Inc. in a business combination accounted for as a purchase. The total cost of the acquisition was $35,500,000, which exceeded the fair value of the net assets of the stations by $32,332,961, which has been allocated to the stations FCC license and goodwill. The excess is being amortized on the straight line method over forty years. (See note 3 and 9) Revenue Recognition Broadcasting operations derive revenue primarily from the sale of program time and commercial announcements to local, regional and national advertisers. Revenue is recognized when the program and commercial announcements are broadcast. Advertising Costs The Company incurs various marketing and promotional costs to add and maintain listenership. These costs are expensed as incurred. Use of Estimates The process of preparing financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from those estimates. Concentration of Credit Risk In the ordinary course of business, the Company maintains cash balances in a money market fund. Such balances are not FDIC insured. The Company periodically maintains cash balances with financial institutions in excess of the $100,000 FDIC insurance limit. The Company's business activity is with customers located within the immediate geographic area. Blocks of advertising time are generally sold on credit on standard business terms. The Company's revenue and accounts receivable primarily relates to advertising of products and services within the radio stations' broadcast areas. The Company performs ongoing credit evaluations of its F-94 WESTCHESTER RADIO, LLC NOTES TO FINANCIAL STATEMENTS--(Continued) customers' financial condition and generally requires no collateral from its customers. Credit losses have been within management's expectations and adequate allowances for any uncollectible accounts receivables are maintained. The radio broadcasting industry is subject to federal regulation by the Federal Communications Commission. These governmental regulations and policies could change over time and there can be no assurance that such changes would not have a material impact upon the Company. Property and Equipment The cost of property and equipment is depreciated over the estimated useful lives of the related assets. Leasehold improvements are depreciated over the lesser of the term of the related lease or the estimated useful lives of the assets. Depreciation is computed on the straight line method for financial reporting purposes and double declining balance method for income tax purposes. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations. The useful lives of property and equipment for purposes of computing depreciation are: Office equipment................................................. 5-7 years Studio equipment................................................. 7 years Building, leasehold improvements and tower....................... 10-40 years
Debt Acquisition Costs Legal and banking fees and other expenses associated with acquisition of the bank financing are being amortized using the interest method over the term of the underlying note. Amortization expense charged to operations for the period was $109,487. Income Taxes The Company, a limited liability company, has elected to be treated as a partnership for income tax purposes. Accordingly, the items of income, loss and credit are taxed directly to the members. Cash Flows For purposes of the statement of cash flows, cash equivalents include time deposits, certificates of deposits, and all highly liquid debt instruments with original maturities of three months or less. Cash paid for interest and income taxes are as follows: Interest.......................................................... $1,458,846 Income taxes...................................................... --
F-95 WESTCHESTER RADIO, LLC NOTES TO FINANCIAL STATEMENTS--(Continued) Barter Transactions The Company barters unsold advertising time for products and services. Such transactions are recorded at the estimated fair value of the products or services received. Barter revenue is recorded when commercials are broadcast and related expenses are recorded when the bartered product or service is used. The fair value of barter and trade-out transactions is included in broadcasting revenue and broadcasting expense. Barter transactions charged to operations were as follows for the period of January 1, 1999 to October 26, 1999: Trade sales...................................................... $ 753,875 Trade expense.................................................... (809,810) --------- Net Trade Out Transactions....................................... $ (55,935) =========
NOTE 2--PROPERTY, PLANT AND EQUIPMENT Property and equipment consisted of the following at October 26, 1999: Land............................................................. $ 573,900 Buildings and leasehold improvements............................. 975,469 Studio and transmission equipment................................ 827,714 Music library.................................................... 3,500 Office equipment and fixtures.................................... 235,120 Property held under capital lease................................ 21,215 ---------- Total.......................................................... 2,636,918 Less: accumulated depreciation................................... (196,614) ---------- Net Property and Equipment....................................... $2,440,304 ==========
Depreciation charged to operations amounted to $124,838 for the period. Property and equipment are pledged as collateral for bank loans (See Note 4). NOTE 3--INTANGIBLE ASSETS Intangible assets consisted of the following at October 26, 1999: FCC license..................................................... $16,832,961 Goodwill........................................................ 2,250,000 Debt acquisition costs.......................................... 580,500 ----------- Total......................................................... 19,663,461 Less: accumulated amortization.................................. (1,485,325) ----------- Net Intangible Assets........................................... $18,178,136 ===========
Amortization charged to operations amounted to $783,090 for the period. F-96 WESTCHESTER RADIO, LLC NOTES TO FINANCIAL STATEMENTS--(Continued) The Company periodically evaluates intangible assets for potential impairment by analyzing the operating results, future cash flows on an undiscounted basis, trends and prospects of the Company's stations, as well as by comparing them to their competitors. The Company also takes into consideration recent acquisition patterns within the broadcast industry, the impact of recently enacted or potential FCC rules and regulations and any other events or circumstances which might indicate potential impact. During the period, certain intangible assets (Goodwill) that was acquired in 1998 were deemed to be impaired. This impairment arouse due to the subsequent sale of the stations assets, which is more fully described in note 9. As a result, Goodwill has been written down by $13,250,000. The write off of Goodwill is included in the Financial Statement as Loss on Impairment. NOTE 4--LONG-TERM DEBT Long-term debt consists of the following at October 26, 1999: Line of credit--bank Interest payable quarterly in arrears at 10%, matures April 2004, Secured by all assets of the company and guaranteed by the parent corporation of a member; maximum available credit $1,000,000..................................................... $ 397,500 Term obligation--bank Interest at 10% payable quarterly in arrears, quarterly payments of principal which are currently $312,500. Matures April 2004, secured by all assets of the company and guaranteed by the parent corporation of a member................................. 23,125,000 Loan payable This obligation is the result of the payments by the guarantor of the bank obligations above of interest and principle on behalf of the Company. This obligation has no stated interest and no maturity date (see note 7).............................. 3,290,241 Note payable--This note has a face value in the amount of $56,884,769 due April 2008. Interest accrues on this obligation at 18% per annum through April 2008. (See Note 7)................ 13,302,279 Capital Lease Obligation.......................................... 16,513 ----------- Total Long-term Debt.......................................... 40,131,533 Less: Current Portion......................................... (1,963,873) ----------- Long-term Debt................................................ $38,167,660 ===========
The following are the maturities of long-term debt for each of the next five years: Year Ending October 26, 2000............................................................ $ 1,960,000 2001............................................................ 1,875,000 2002............................................................ 2,187,500 2003............................................................ 9,375,000 2004............................................................ 8,125,000 ----------- $23,522,500 ===========
At October 26, 1999, the Company had $602,500 of unused lines of credit with a bank to be drawn upon as needed. F-97 WESTCHESTER RADIO, LLC NOTES TO FINANCIAL STATEMENTS--(Continued) On October 27, 1999 the bank obligations were repaid from the proceeds of the sale (Note 9) and payments by a member under their guarantee obligation. The bank loan agreements contain various covenants pertaining to the maintenance of various record keeping, reporting and ratio requirements. Specifically, at October 26, 1999, the Company was in default of the covenants related to the maintenance of its leverage ratio, interest coverage ratio, and net broadcast earnings. Under the terms of the agreement, the bank may call the loan if the Company is in violation of any restrictive covenant. However, the obligations have subsequently been fully repaid. Capital Lease The Company is the lessee of office equipment under capital leases expiring in various years through 2003. The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. The assets are depreciated over the lower of their related lease terms or their estimated productive lives. Depreciation of assets under capital leases is included in depreciation expense for the period. Depreciation on assets under capital leases charged to expense for the period was $4,690. Following is a summary of property held under capital leases: Phone System...................................................... $21,215 Less: Accumulated depreciation.................................... (6,205) ------- Net............................................................... $15,010 =======
Minimum future lease payments under capital leases as of October 26, 1999 for each of the next five years and in the aggregate are: Year Ended October 26, 1999: 2000............................................................ $ 5,352 2001............................................................ 5,352 2002............................................................ 5,352 2003............................................................ 3,122 ------- Total minimum lease payments.................................. 19,178 Less: Amount representing interest................................ (2,665) ------- Present value of net minimum lease payments....................... $16,513 =======
Interest rates on this capitalized lease is 14.35% and is imputed based on the lower of company's incremental borrowing rate at the inception of the lease or the lessor's implicit rate of return. F-98 WESTCHESTER RADIO, LLC NOTES TO FINANCIAL STATEMENTS--(Continued) NOTE 5--COMMITMENTS Guarantee of Indebtedness The Company has guaranteed the 13 1/4% senior subordinated notes dated April 2, 1995 which have a principal value of $76,808,000 of Capstar Radio Broadcasting Partners, Inc., the parent corporation of the Company's nonvoting member. Employment Contract The Company has entered into an employment contract with its managing member through April 2000 that provides for a minimum annual salary. At October 26, 1999, the total commitment was $150,000 per annum. Operating Leases The Company leases various tower facilities under operating leases which have various expiration dates. The Company also contracts for a variety of services and equipment through short term agreements and leases under cash or barter arrangements. These agreements and leases are renewed or replaced at the end of their term at the discretion of management. Minimum future rentals under noncancelable operating leases having remaining terms in excess of one year for each of the next five years and in the aggregate are as follows: Year ended October 26, 2000............................................................ $ 7,500 2001............................................................ 7,500 2002............................................................ 7,500 2003............................................................ 7,500 2004............................................................ 7,500 ------- Total Minimum Lease Payments.................................. $37,500 =======
NOTE 6--PENSION PLAN The Company has a 401(k) Profit Sharing Plan covering all full time employees meeting eligibility requirements. The Company matches fifty percent of the employees contributions up to six percent of compensation. For the period ended October 26, 1999, the Company contributed $15,052. NOTE 7--RELATED PARTIES As part of the acquisition of the stations, the Company borrowed from the parent corporation of one of its members, moneys to complete the acquisition. The note has a face value of $56,884,769 and is due in April 2008. The note has been discounted to its present value at the rate of 18% and was, accordingly, assigned a value of $10,150,000 and is subordinate to the bank obligations. During 1998, the Company, subsequent to the contribution of the net assets of Commodore Media of Westchester Inc., refinanced those assets and distributed $35,000,000 of the proceeds to its member. F-99 WESTCHESTER RADIO, LLC NOTES TO FINANCIAL STATEMENTS--(Continued) The note including accumulated interest is convertible at the option of the holder at any time, into a maximum of 13,000 member interests in the company based on a prescribed formula (See Note 8). The Company, as a result of its inability to cover principal and interest payments on its bank lines as they came due, relied on the guarantee of a member to meet the obligations. At October 26, 1999, the member had advanced a total of $3,290,241 to the Company to meet its obligations. NOTE 8--MEMBERS' EQUITY The members of the Company have liability for the debts, obligations and liabilities of the Company up to the amount of capital contributed to the Company. The Company is authorized to issue up to 14,000 limited liability company interests which may be designated as voting interests or nonvoting interests upon issuance. Subject to obtaining necessary consent, outstanding nonvoting interests are convertible, at any time, upon the election of the holder into a like number of voting interests. At October 26, 1999, the Company had a total of 1,000 interests outstanding, of which 700 were voting interests. NOTE 9--SUBSEQUENT SALE OF THE COMPANY On October 27, 1999, the tangible assets, FCC license and goodwill of the company were purchased by Aurora of Westchester L.L.C. The total selling price was $20,250,000. F-100 INDEPENDENT AUDITORS' REPORT To the Members Westchester Radio, LLC We have audited the accompanying balance sheet of Westchester Radio, LLC (a limited liability company) as of December 31, 1998, and the related statements of operations and members' deficiency and cash flows for the period April 2, 1998 (date of inception) to December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Westchester Radio, LLC as of December 31, 1998, and the results of its operations and its cash flows for the period of April 2, 1998 (date of inception) to December 31, 1998 in conformity with generally accepted accounting principles. Weeks Holderbaum Huber & DeGraw LLP Bridgewater, New Jersey February 19, 1999 (except for Note 9, as to which the date is October 27, 1999) F-101 WESTCHESTER RADIO, LLC BALANCE SHEET December 31, 1998 ASSETS CURRENT ASSETS: Cash and cash equivalents....................................... $ 197,971 Accounts receivable, less allowance for doubtful accounts of $111,673....................................................... 972,162 Other current assets............................................ 46,018 ----------- Total current assets.......................................... 1,216,151 PROPERTY, PLANT AND EQUIPMENT--NET................................ 2,483,646 Intangible assets--net............................................ 32,211,227 Security deposits................................................. 8,427 ----------- Total assets.................................................. $35,919,451 =========== LIABILITY AND MEMBERS' DEFICIENCY CURRENT LIABILITIES: Current maturities of long-term debt............................ $ 1,253,479 Accounts payable and accrued expenses........................... 309,062 ----------- Total current liabilities..................................... 1,562,541 LONG-TERM DEBT.................................................... 36,718,038 MEMBERS' DEFICIENCY............................................... (2,361,128) ----------- Total liabilities and members' deficiency..................... $35,919,451 ===========
The notes to financial statements are an integral part of this statement. F-102 WESTCHESTER RADIO, LLC STATEMENT OF OPERATIONS AND MEMBERS' DEFICIENCY For the Period of April 2, 1998 (date of inception) to December 31, 1998 Revenues: Broadcast revenue.............................................. $ 4,036,192 Less: agency commissions....................................... (385,014) ------------ Net broadcast revenue........................................ 3,651,178 ------------ Other non broadcast revenue...................................... 118,873 ------------ Total revenue................................................ 3,770,051 ------------ Expenses: Programming and technical...................................... 605,440 Sales and advertising.......................................... 1,009,839 Administrative................................................. 777,257 ------------ Total expenses............................................... 2,392,536 ------------ Income from operations........................................... 1,377,515 Other (income) expenses: Reorganization/start up cost................................... 67,246 Depreciation................................................... 71,776 Amortization................................................... 702,234 Interest expense............................................... 3,248,178 Interest income................................................ (791) ------------ Total other (income) expenses................................ 4,088,643 ------------ NET LOSS..................................................... (2,711,128) Members' equity at beginning of period........................... -- Contributed capital.............................................. 35,350,000 Member Distribution.............................................. (35,000,000) ------------ Members' deficiency at end of period............................. $ (2,361,128) ============
The notes to financial statements are an integral part of this statement. F-103 WESTCHESTER RADIO, LLC STATEMENT OF CASH FLOWS For the Period April 2, 1998 (date of inception) to December 31, 1998 Cash Flows From Operating Activities: Net Loss....................................................... $(2,711,128) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization.................................. 774,010 Bad debt provision (recovery).................................. (19,173) Noncash interest accrued on long-term obligations.............. 1,411,358 Increase in accounts receivable................................ (135,834) Increase in other current assets............................... (22,935) Increase in accounts payable................................... 116,236 ----------- Total adjustments............................................ 2,123,662 ----------- Net cash used by operating activities........................ (587,466) Cash flows from investing activities: Acquisition of stations........................................ (35,500,000) Purchase of property and equipment............................. (23,417) ----------- Net cash used by investing activities........................ (35,523,417) ----------- Cash flows from financing activities: Proceeds from bank loans....................................... 25,580,000 Proceeds from member loans..................................... 12,080,778 Proceeds from capital contributions............................ 350,000 Repayment of bank loans........................................ (1,120,500) Principle payments on installment obligation................... (1,624) Payment of debt acquisition costs.............................. (580,000) ----------- Net cash provided by financing activities.................... 36,308,654 ----------- NET INCREASE IN CASH AND CASH EQUIVALENTS.................... 197,771 Cash and cash equivalents at beginning of period................. 200 ----------- Cash and cash equivalents at end of period....................... $ 197,971 =========== Noncash financing activities: Financing under capital lease.................................. $ 21,215 ===========
The notes to financial statements are an integral part of this statement. F-104 WESTCHESTER RADIO, LLC NOTES TO FINANCIAL STATEMENTS NOTE 1--SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Business Westchester Radio, LLC (the Company) operates several radio stations in Westchester county, New York. The Company commenced operations on April 2, 1998 with the contribution of the assets of WFAS-FM, WFAS-AM and WZZN-FM from Commodore Media of Westchester, Inc. The assets and operations of the Company were solely comprised from WFAS-FM, WFAS-AM and WZZN-FM. The Company derives its revenue primarily from the sale of radio advertising. Contribution of Assets On April 2, 1998, the Company acquired the net assets and FCC license of WFAS-FM, WFAS-AM and WZZN-FM (the Stations) from Commodore Media of Westchester, Inc. in a business combination accounted for as a purchase. The results of operations of the acquired stations are included in the accompanying financial statements since the date of acquisition. The total cost of the acquisition was $35,500,000, which exceeded the fair value of the net assets of the stations by $32,332,961, which has been allocated to the stations FCC license and goodwill. The excess is being amortized on the straight line method over forty years. Revenue Recognition Broadcasting operations derive revenue primarily from the sale of program time and commercial announcements to local, regional and national advertisers. Revenue is recognized when the program and commercial announcements are broadcast. Advertising Costs The Company incurs various marketing and promotional costs to add and maintain listenership. These are expensed as incurred. Use of Estimates The process of preparing financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from those estimates. Concentration of Credit Risk In the ordinary course of business, the Company maintains cash balances in a money market fund. Such balances are not FDIC insured. The Company periodically maintains cash balances with financial institutions in excess of the $100,000 FDIC insurance limit. The Company's business activity is with customers located within the immediate geographic area. Blocks of advertising time are generally sold on credit on standard business terms. F-105 WESTCHESTER RADIO, LLC NOTES TO FINANCIAL STATEMENTS--(Continued) The Company's revenue and accounts receivable primarily relates to advertising of products and services within the radio stations' broadcast areas. The Company performs ongoing credit evaluations of its customers' financial condition and generally requires no collateral from its customers. Credit losses have been within management's expectations and adequate allowances for any uncollectible accounts receivables are maintained. The radio broadcasting industry is subject to federal regulation by the Federal Communications Commission. These governmental regulations and policies could change over time and there can be no assurance that such changes would not have a material impact upon the Company. Property and Equipment The cost of property and equipment is depreciated over the estimated useful lives of the related assets. Leasehold improvements are depreciated over the lesser of the term of the related lease or the estimated useful lives of the assets. Depreciation is computed on the straight line method for financial reporting purposes and double declining balance method for income tax purposes. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations. The useful lives of property and equipment for purposes of computing depreciation are: Office equipment................................................. 5-7 years Studio equipment................................................. 7 years Building, leasehold improvements and tower....................... 10-40 years
Debt Acquisition Costs Legal and banking fees and other expenses associated with acquisition of the bank financing are being amortized using the interest method over the term of the underlying note. Amortization expense charged to operations in 1998 was $95,991. Income Taxes The Company, a limited liability company, has elected to be treated as a partnership for income tax purposes. Accordingly, the items of income, loss and credit are taxed directly to the members. Cash Flows For purposes of the statement of cash flows, cash equivalents include time deposits, certificates of deposits, and all highly liquid debt instruments with original maturities of three months or less. Cash paid for interest and income taxes are as follows: Interest.......................................................... $1,836,820 Income taxes...................................................... --
F-106 WESTCHESTER RADIO, LLC NOTES TO FINANCIAL STATEMENTS--(Continued) Barter Transactions The Company barters unsold advertising time for products and services. Such transactions are recorded at the estimated fair value of the products or services received. Barter revenue is recorded when commercials are broadcast and related expenses are recorded when the bartered product or service is used. The fair value of barter and trade-out transactions is included in broadcasting revenue and broadcasting expense. Barter transactions charged to operations were as follows for the period of April 2, 1998 to December 31, 1998: Trade sales...................................................... $ 650,240 Trade expense.................................................... (712,658) --------- Net trade out transactions..................................... $ (62,418) =========
NOTE 2--PROPERTY, PLANT AND EQUIPMENT Property and equipment consisted of the following at December 31, 1998: Land............................................................. $ 573,900 Buildings and leasehold improvements............................. 954,623 Studio and transmission equipment................................ 802,518 Music library.................................................... 3,500 Office equipment and fixtures.................................... 199,666 Property held under capital lease................................ 21,215 ---------- Total.......................................................... 2,555,422 Less: accumulated depreciation................................... (71,776) ---------- Net property and equipment....................................... $2,483,646 ==========
Depreciation charged to operations amounted to $71,776 for the period April 2, 1998 to December 31, 1998. Property and equipment are pledged as collateral for bank loans (See Note 4). NOTE 3--INTANGIBLE ASSETS Intangible assets consisted of the following at December 31, 1998: FCC license..................................................... $16,832,961 Goodwill........................................................ 15,500,000 Debt acquisition costs.......................................... 580,500 ----------- Total......................................................... 32,913,461 Less: accumulated amortization.................................. (702,234) ----------- Net intangible assets........................................... $32,211,227 ===========
Amortization charged to operations amounted to $702,234 for the period April 2, 1998 to December 31, 1998. F-107 WESTCHESTER RADIO, LLC NOTES TO FINANCIAL STATEMENTS--(Continued) The Company periodically evaluates intangible assets for potential impairment by analyzing the operating results, future cash flows on an undiscounted basis, trends and prospects of the Company's stations, as well as by comparing them to their competitors. The Company also takes into consideration recent acquisition patterns within the broadcast industry, the impact of recently enacted or potential FCC rules and regulations and any other events or circumstances which might indicate potential impact. At this time, in the opinion of management, no impairment has occurred. NOTE 4--LONG-TERM DEBT Long-term debt consists of the following at December 31, 1998: Line of credit--bank Interest payable quarterly in arrears at 8.0625%, matures April 2004, Secured by all assets of the company and guaranteed by the parent corporation of a member; maximum available credit $1,000,000..................................................... $ 397,500 Term obligation--bank Interest at 8.0625% payable quarterly in arrears, quarterly payments of principal which are currently $312,500. Matures April 2004, secured by all assets of the company and guaranteed by the parent corporation of a member.......................... 24,062,500 Loan payable This obligation is the result of the payments by the guarantor of the bank obligations above of interest and principle on behalf of the Company. This obligation has no stated interest and no maturity date (see note 7).............................. 1,930,693 Note payable--This note has a face value in the amount of $56,884,769 due April 2008. Interest accrues on this obligation at 18% per annum through April 2008. (See Note 7)................ 11,561,358 ----------- Total long-term debt.......................................... 37,952,051 Less: Current Portion......................................... (1,250,000) ----------- Long-term Debt................................................ $36,702,051 ===========
The following are the maturities of long-term debt for each of the next five years: Year Ending December 31, 1999........................................................... $ 1,250,000 2000........................................................... 1,718,750 2001........................................................... 1,875,000 2002........................................................... 2,343,750 2003........................................................... 12,812,125 ----------- $19,999,625 ===========
At December 31, 1998, the Company had $602,500 of unused lines of credit with a bank to be drawn upon as needed. The bank loan agreements contain various covenants pertaining to the maintenance of various record keeping, reporting and ratio requirements. F-108 WESTCHESTER RADIO, LLC NOTES TO FINANCIAL STATEMENTS--(Continued) Specifically, at December 31, 1998, the Company was in default of the covenants related to the maintenance of its leverage ratio, interest coverage ratio, and net broadcast earnings. Under the terms of the agreement, the bank may call the loan if the Company is in violation of any restrictive covenant. As of February 19, 1999, the bank had not waived the requirement. Capital Lease The Company is the lessee of office equipment under capital leases expiring in various years through 2003. The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. The assets are depreciated over the lower of their related lease terms or their estimated productive lives. Depreciation of assets under capital leases is included in depreciation expense for 1998. Depreciation on assets under capital leases charged to expense in 1998 was $1,515. Following is a summary of property held under capital leases: Phone System........................................................ $21,215 Less: Accumulated depreciation...................................... (1,515) ------- Net................................................................. $19,700 =======
Minimum future lease payments under capital leases as of December 31, 1998 for each of the next five years and in the aggregate are: Year Ended December 31: 1999.............................................................. $ 5,352 2000.............................................................. 5,352 2001.............................................................. 5,352 2002.............................................................. 5,352 2003.............................................................. 2,230 ------- Total minimum lease payments.................................... 23,638 Less: Amount representing interest.................................. (4,257) ------- Present value of net minimum lease payments......................... $19,381 =======
Interest rates on this capitalized lease is 14.35% and is imputed based on the lower of company's incremental borrowing rate at the inception of the lease or the lessor's implicit rate of return. NOTE 5--COMMITMENTS Guarantee of Indebtedness The Company has guaranteed the 13 1/4% senior subordinated notes dated April 2, 1995 which have a principal value of $76,808,000 of Capstar Radio Broadcasting Partners, Inc., the parent corporation of the Company's nonvoting member. F-109 WESTCHESTER RADIO, LLC NOTES TO FINANCIAL STATEMENTS--(Continued) Employment Contract The Company has entered into an employment contract with its managing member through April 2000 that provides for a minimum annual salary. At December 31, 1998, the total commitment was $150,000 per annum. Operating Leases The Company leases various tower facilities under operating leases which does not currently have various expiration dates. The Company also contracts for a variety of services and equipment through short term agreements and leases under cash or barter arrangements. These agreements and leases are renewed or replaced at the end of their term at the discretion of management. Minimum future rentals under noncancelable operating leases having remaining terms in excess of one year for each of the next five years and in the aggregate are as follows: Year ended December 31, 1999.............................................................. $16,182 2000.............................................................. 7,500 2001.............................................................. 7,500 2002.............................................................. 7,500 2003.............................................................. 7,500 ------- Total minimum lease payments.................................... $46,182 =======
NOTE 6--PENSION PLAN The Company has a 401(k) Profit Sharing Plan covering all full time employees meeting eligibility requirements. The Company matches fifty percent of the employees contributions up to six percent of compensation. For the period ended December 31, 1998, the Company contributed $7,674. NOTE 7--RELATED PARTIES As part of the acquisition of the stations, the Company borrowed from the parent corporation of one of its members, moneys to complete the acquisition. The note has a face value of $56,884,769 and is due in April 2008. The note has been discounted to its present value at the rate of 18% and was, accordingly, assigned a value of $10,150,000 and is subordinate to the bank obligations. Commodoro Media of Westchester contributed $35,350,000 to the Company, $35,000,000 in property and equipment and $350,000 in cash. The Company subsequent to the contribution of the net assets of Commodore Media of Westchester Inc. refinanced those assets and distributed $35,000,000 of the proceeds to its member. The note including accumulated interest is convertible at the option of the holder at any time, into a maximum of 13,000 member interests in the company based on a prescribed formula (See Note 8). F-110 WESTCHESTER RADIO, LLC NOTES TO FINANCIAL STATEMENTS--(Continued) The Company, as a result of its inability to cover principal and interest payments on its bank lines as they came due, relied on the guarantee of a member to meet the obligations. At December 31, 1998, the member had advanced $1,930,693 to the Company to meet its obligations. NOTE 8--MEMBERS' EQUITY The members of the Company have liability for the debts, obligations and liabilities of the Company up to the amount of capital contributed to the Company. The Company is authorized to issue up to 14,000 limited liability company interests which may be designated as voting interests or nonvoting interests upon issuance. Subject to obtaining necessary consent, outstanding nonvoting interests are convertible, at any time, upon the election of the holder into a like number of voting interests. At December 31, 1998, the Company had a total of 1,000 interests outstanding, of which 700 were voting interests. NOTE 9--SUBSEQUENT SALE OF THE COMPANY On October 27, 1999, the tangible assets, FCC license and goodwill of the company were purchased by Aurora of Westchester L.L.C. The total cost of the acquisition was $22,250,000. F-111 INDEPENDENT AUDITORS' REPORT To the Stockholders Commodore Media of Westchester, Inc. We have audited the accompanying balance sheet of Commodore Media of Westchester, Inc. as of April 1, 1998 and the related statements of operations and retained earnings and cash flows for the period of January 1, 1998 to April 1, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Commodore Media of Westchester, Inc. as of April 1, 1998, and the results of its operations and its cash flows for the period of January 1, 1998 to April 1, 1998 in conformity with generally accepted accounting principles. Weeks Holderbaum Huber & DeGraw, LLP Bridgewater, New Jersey July 29, 1999 F-112 COMMODORE MEDIA OF WESTCHESTER, INC. BALANCE SHEET April 1, 1998 ASSETS Current Assets: Cash and cash equivalents........................................ $ 9,681 Accounts receivable, less allowance for doubtful accounts of $130,846........................................................ 817,154 Other current assets............................................. 17,306 ----------- Total Current Assets........................................... 844,141 Property, Plant and Equipment--Net................................. 1,683,789 Intangible Assets--Net............................................. 31,979,119 Security Deposits.................................................. 8,427 ----------- Total Assets................................................... $34,515,476 =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liability: Accounts payable and accrued expenses............................ $ 179,554 Due to Parent Corporation and Affiliates......................... 9,029,851 Stockholders Equity: Common stock, 100 shares authorized, issued, and outstanding..... 100 Additional paid-in-capital....................................... 23,596,134 Retained earnings................................................ 1,709,837 ----------- Total Stockholders Equity...................................... 25,306,071 ----------- Total Liabilities and Stockholders' Equity..................... $34,515,476 ===========
Notes to Financial Statements are an Integral Part of this Statement F-113 COMMODORE MEDIA OF WESTCHESTER, INC. STATEMENT OF OPERATIONS AND RETAINED EARNINGS For the period of January 1, 1998 to April 1, 1998 Revenues: Broadcast revenue................................................ $ 1,163,673 Less: agency commissions......................................... (101,200) ----------- Net Broadcast Revenue.......................................... 1,062,473 Other non-broadcast revenue...................................... 44,684 ----------- Total Revenue.................................................. 1,107,157 Expenses: Programming and technical........................................ 193,364 Sales and advertising............................................ 283,875 Administrative................................................... 285,088 ----------- Total Expenses................................................. 762,327 ----------- Income from Operations............................................. 344,830 Other Expenses: Depreciation..................................................... 30,000 Amortization..................................................... 208,489 ----------- Total Other Expenses........................................... 238,489 ----------- Net Income......................................................... 106,341 Retained Earnings at Beginning of Period........................... 1,603,496 ----------- Retained Earnings at End of Period................................. $ 1,709,837 ===========
The Notes to Financial Statements are an Integral Part of this Statement F-114 COMMODORE MEDIA OF WESTCHESTER, INC. STATEMENT OF CASH FLOWS For the period of January 1, 1998 to April 1, 1998 Cash Flows from Operating Activities: Net Income....................................................... $ 106,341 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and amortization.................................... 238,489 Bad debt provision (recovery).................................... (34,184) Decrease in accounts receivable.................................. 437,821 Decrease in other current assets................................. 48,894 Decrease in security deposits.................................... 480 Decrease in accounts payable..................................... (201,611) --------- Total Adjustments.............................................. 489,889 --------- Net cash provided by operating activities...................... 596,230 Cash Flows From Investing Activities: Purchase of property and equipment............................... (44,502) Cash Flows from Financing Activities: Net repayment of advances to parent corporation and affiliates... (625,614) --------- Net Decrease in Cash and Cash Equivalents........................ (73,886) Cash and Cash Equivalents at Beginning of Period................. 83,567 --------- Cash and Cash Equivalents at End of Period....................... $ 9,681 =========
The Notes to Financial Statements are an Integral Part of this Statement F-115 COMMODORE MEDIA OF WESTCHESTER, INC. NOTES TO FINANCIAL STATEMENTS Note 1--Significant Accounting Policies Organization and Nature of Business Commodore Media of Westchester, Inc. (the Company) operates several radio stations in Westchester county, New York. The signals licensed by the Federal Communications Commission (FCC) include WFAS-FM, WFAS-AM and WZZN-FM (the Stations). The Company derives its revenue primarily from the sale of radio advertising. Commodore Media of Westchester, Inc. is a wholly owned subsidiary of Capstar Broadcasting Corporation. Sale of Stations On April 2, 1998, the Company contributed all of its net assets and its related licenses to Westchester Radio, LLC. in exchange for a 100% membership interest. The company's membership interest was comprised of 700 voting and 300 nonvoting shares. Westchester Radio, LLC. subsequently refinanced the assets of the station and made a distribution back to the company in the amount of $35,000,000. The company subsequently sold its voting interests and retained its 30% nonvoting interest of the Limited Liability Company. The business combination has been accounted for as a purchase. This financial statement contains the results of operations and the financial position of the company immediately before the contribution of assets to Westchester Radio, LLC. Revenue Recognition Broadcasting operations derive revenue primarily from the sale of program time and commercial announcements to local, regional and national advertisers. Revenue is recognized when the program and commercial announcements are broadcast. Advertising Costs The Company incurs various marketing and promotional costs to add and maintain listenership. These are expensed as incurred. Use of Estimates The process of preparing financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from those estimates. Concentration of Credit Risk The Company's business activity is with customers located within the immediate geographic area. Blocks of advertising time are generally sold on credit on standard business terms. F-116 COMMODORE MEDIA OF WESTCHESTER,INC. NOTES TO FINANCIAL STATEMENTS--(Continued) The Company's revenue and accounts receivable primarily relates to advertising of products and services within the radio stations' broadcast areas. The Company performs ongoing credit evaluations of its customers' financial condition and, generally requires no collateral from its customers. Credit losses have been within management's expectations and adequate allowances for any uncollectible accounts receivables are maintained. The radio broadcasting industry is subject to federal regulation by the Federal Communications Commission. These governmental regulations and policies could change over time and there can be no assurance that such changes would not have a material impact upon the Company. Property and Equipment The cost of property and equipment is depreciated over the estimated useful lives of the related assets. Leasehold improvements are depreciated over the lesser of the term of the related lease or the estimated useful lives of the assets. Depreciation is computed on the straight line method for financial reporting purposes and double declining balance for income tax purposes. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations. The useful lives of property and equipment for purposes of computing depreciation are: Office equipment................................................. 5-7 years Studio equipment................................................. 7 years Building, leasehold improvements and tower....................... 10-40 years
Income Taxes The Company files a consolidated income tax return with its corporate parent. Cash Flows For purposes of the statement of cash flows, cash equivalents include time deposits, certificates of deposits, and all highly liquid debt instruments with original maturities of three months or less. There was no cash paid for interest and income taxes. Barter Transactions The Company barters unsold advertising time for products and services. Such transactions are recorded at the estimated fair value of the products or services received. Barter revenue is recorded when commercials are broadcast and related expenses are recorded when the bartered product or service is used. F-117 COMMODORE MEDIA OF WESTCHESTER, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) The fair value of barter and trade-out transactions is included in broadcasting revenue and broadcasting expense. Barter transactions charged to operations were as follows: Trade sales...................................................... $ 245,893 Trade expense.................................................... (163,592) --------- Net Trade Transactions......................................... $ 82,301 =========
Note 2--Property, Plant and Equipment Property and equipment consisted of the following at April 1, 1998: Land............................................................. $ 420,000 Buildings and leasehold improvements............................. 685,762 Studio and transmission equipment................................ 565,797 Music library.................................................... 2,556 Office equipment and fixtures.................................... 151,396 ---------- Total.......................................................... 1,825,511 Less: accumulated depreciation................................... (141,722) ---------- Net Property and Equipment....................................... $1,683,789 ==========
Depreciation charged to operations amounted to $30,000. Property and equipment are pledged as collateral for various obligations of the company's corporate parent. (See Note 4). Note 3--Intangible Assets Intangible assets consisted of the following at April 1, 1998: FCC license..................................................... $33,157,140 Goodwill........................................................ 32,000 ----------- Total......................................................... 33,189,140 Less: accumulated amortization.................................. (1,210,021) ----------- Net Intangible Assets........................................... $31,979,119 ===========
Amortization charged to operations amounted to $208,489. The Company periodically evaluates intangible assets for potential impairment by analyzing the operating results, future cash flows on an undiscounted basis, trends and prospects of the Company's stations, as well as by comparing them to their competitors. The Company also takes into consideration recent acquisition patterns within the broadcast industry, the impact of recently enacted or potential FCC rules and regulations and any other events or circumstances which might indicate potential impact. At this time, in the opinion of management, no impairment has occurred. F-118 COMMODORE MEDIA OF WESTCHESTER, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) Note 4--Related Parties The company receives advances from and pays advances to its parent corporation and other related affiliated companies. In addition the Parent Corporation allocates expenses, based on revenue, to the company, which are related to corporate overhead and other costs related to the management and operation of the stations. The company has pledged substantially all of its assets as a cross guarantor on a variety of corporate obligations. Note 5--Commitments Operating Leases The Company leases various tower facilities under operating leases, which do not currently have expiration dates. The Company also contracts for a variety of services and equipment through short-term agreements and leases under cash or barter arrangements. These agreements and leases are renewed or replaced at the end of their term at the discretion of management. Minimum future rentals under noncancelable operating leases having remaining terms in excess of one year for each of the next five years and in the aggregate are as follows: Year ended April 1, 1999............................................................. $ 16,182 2000............................................................. 7,500 2001............................................................. 7,500 2002............................................................. 7,500 2003............................................................. 7,500 -------- Total Minimum Lease Payments................................... $ 46,182 ========
Note 6--Pension Plan The Company has a 401(k) Profit Sharing Plan covering all full time employees meeting eligibility requirements. The Company matches fifty percent of the employee's contributions up to six percent of compensation. For the period ended April 1, 1998, the Company contributed $8,760. F-119 INDEPENDENT AUDITORS' REPORT To the Stockholders: Commodore Media of Westchester, Inc. We have audited the accompanying balance sheet of Commodore Media of Westchester, Inc. as of December 31, 1997, and the related statements of operations, retained earnings and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Commodore Media of Westchester, Inc. as of December 31, 1997, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. Weeks Holderbaum Huber & DeGraw LLP Bridgewater, New Jersey July 29, 1999 F-120 COMMODORE MEDIA OF WESTCHESTER, INC. BALANCE SHEET December 31, 1997 ASSETS CURRENT ASSETS: Cash and cash equivalents....................................... $ 83,567 Accounts receivable, less allowance for doubtful accounts of $165,030....................................................... 1,220,791 Other current assets............................................ 66,200 ------------ Total Current Assets.......................................... 1,370,558 PROPERTY, PLANT AND EQUIPMENT--NET................................ 1,669,287 Intangible Assets--Net............................................ 32,187,608 Security Deposits................................................. 8,907 ------------ Total Assets.................................................. $ 35,236,360 ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITY: Accounts payable and accrued expenses........................... $ 381,165 Due to Parent Corporation and Affiliates.......................... 9,655,465 Stockholders' Equity: Common stock, 100 shares authorized, issued, and outstanding.... 100 Additional paid-in-capital...................................... 23,596,134 Retained earnings............................................... 1,603,496 ------------ Total Stockholders' Equity.................................... 25,199,730 ------------ Total Liabilities and Stockholders' Equity.................... $ 35,236,360 ============
The Notes to Financial Statements are an Integral Part of this Statement F-121 COMMODORE MEDIA OF WESTCHESTER, INC. STATEMENT OF OPERATIONS AND RETAINED EARNINGS For the year ended December 31, 1997 Revenues: Broadcast revenue........ $ 6,142,742 Less: agency commissions.... (596,167) ----------- Net Broadcast Revenue...... 5,546,575 Other non- broadcast revenue........ 156,398 ----------- Total Revenue...... 5,702,973 Expenses: Programming and technical...... 1,000,691 Sales and advertising.... 830,649 Administrative.. 1,258,264 ----------- Total Expenses..... 3,089,604 ----------- Income from Operations....... 2,613,369 Other Expenses: Depreciation.... 103,640 Amortization.... 829,729 ----------- Total Other Expenses..... 933,369 ----------- Net Income........ 1,680,000 Accumulated Deficit at beginning of year, as previously reported......... (96,656) Contribution of net assets of station WZZN by parent company... 20,152 ----------- Accumulated Deficit at beginning of year, as restated......... (76,504) ----------- Retained Earnings at End of Year... $ 1,603,496 ===========
The Notes to Financial Statements are an Integral Part of this Statement F-122 COMMODORE MEDIA OF WESTCHESTER, INC. STATEMENT OF CASH FLOWS For the year ended December 31, 1997 Cash Flows from Operating Activities: Net Income....................................................... $ 1,680,000 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and amortization.................................. 933,369 Bad debt provision (recovery).................................. (11,980) Increase in accounts receivable................................ (240,722) Increase in other current assets............................... (66,200) Increase in security deposits.................................. (793) Increase in accounts payable................................... 56,683 ----------- Total Adjustments............................................ 670,357 ----------- Net cash provided by operating activities.................... 2,350,357 Cash Flows from Investing Activities: Purchase of property and equipment............................. (76,948) Cash Flows from Financing Activities: Net repayment of advances from parent corporation and affiliates.................................................... (2,228,542) ----------- Net Increase in Cash and Cash Equivalents........................ 44,867 Cash and Cash Equivalents at Beginning of Period................. 38,700 ----------- Cash and Cash Equivalents at End of Period....................... $ 83,567 ===========
The Notes to Financial Statements are an Integral Part of this Statement F-123 COMMODORE MEDIA OF WESTCHESTER, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1--SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Business Commodore Media of Westchester, Inc. (the Company) operates several radio stations in Westchester county, New York. The signals licensed by the Federal Communications Commission (FCC) include WFAS-FM, WFAS-AM and WZZN-FM (the Stations). The Company derives its revenue primarily from the sale of radio advertising. The company is a wholly owned subsidiary of Capstar Broadcasting. Purchase and Sale of Stations On January 1, 1997 the net assets of WZZN-FM were transferred to the company by its parent corporation. In April 1998, the Company was sold to Westchester Radio LLC., who acquired the net assets and FCC license of the Stations from Commodore Media of Westchester, Inc. in a business combination accounted for as a purchase. Revenue Recognition Broadcasting operations derive revenue primarily from the sale of program time and commercial announcements to local, regional and national advertisers. Revenue is recognized when the program and commercial announcements are broadcast. Advertising Costs The Company incurs various marketing and promotional costs to add and maintain listenership. These are expensed as incurred. Use of Estimates The process of preparing financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from those estimates. Concentration of Credit Risk The Company's business activity is with customers located within the immediate geographic area. Blocks of advertising time are generally sold on credit on standard business terms. The Company's revenue and accounts receivable primarily relates to advertising of products and services within the radio stations' broadcast areas. The Company performs ongoing credit evaluations of its customers' financial condition and, generally requires no collateral from its customers. Credit losses have been within management's expectations and adequate allowances for any uncollectible accounts receivables are maintained. F-124 COMMODORE MEDIA OF WESTCHESTER, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) The radio broadcasting industry is subject to federal regulation by the Federal Communications Commission. These governmental regulations and policies could change over time and there can be no assurance that such changes would not have a material impact upon the Company. Property and Equipment The cost of property and equipment is depreciated over the estimated useful lives of the related assets. Leasehold improvements are depreciated over the lesser of the term of the related lease or the estimated useful lives of the assets. Depreciation is computed on straight line method for financial reporting purposes and double declining balance method for income tax purposes. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations. The useful lives of property and equipment for purposes of computing depreciation are: Office equipment............................................... 5-7 years Studio equipment............................................... 7 years Building, leasehold improvements and tower..................... 10-40 years
Income Taxes The Company files a consolidated income tax return with its corporate parent. Cash Flows For purposes of the statement of cash flows, cash equivalents include time deposits, certificates of deposits, and all highly liquid debt instruments with original maturities of three months or less. There was no cash paid for interest and income taxes. Barter Transactions The Company barters unsold advertising time for products and services. Such transactions are recorded at the estimated fair value of the products or services received. Barter revenue is recorded when commercials are broadcast and related expenses are recorded when the bartered product or service is used. The fair value of barter and trade-out transactions is included in broadcasting revenue and broadcasting expense. Barter transactions charged to operations were as follows: Trade sales..................................................... $ 792,021 Trade expense................................................... (725,383) --------- Net Trade Revenue............................................. $ 66,638 =========
F-125 COMMODORE MEDIA OF WESTCHESTER, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) NOTE 2--PROPERTY, PLANT AND EQUIPMENT Property and equipment consisted of the following at December 31, 1997: Land............................................................. $ 420,000 Buildings and leasehold improvements............................. 669,900 Studio and transmission equipment................................ 565,797 Music library.................................................... 2,556 Office equipment and fixtures.................................... 122,755 ---------- Total.......................................................... 1,781,008 Less: accumulated depreciation................................... (111,721) ---------- Net Property and Equipment....................................... $1,669,287 ==========
Depreciation charged to operations amounted to $103,640. Property and equipment are pledged as collateral for various obligations of the company's corporate parent. (See Note 4). NOTE 3--INTANGIBLE ASSETS Intangible assets consisted of the following at December 31, 1997: FCC license..................................................... $33,157,140 Goodwill........................................................ 32,000 ----------- Total......................................................... 33,189,140 Less: accumulated amortization.................................. (1,001,532) ----------- Net Intangible Assets........................................... $32,187,608 ===========
Amortization charged to operations amounted to $829,729. The Company periodically evaluates intangible assets for potential impairment by analyzing the operating results, future cash flows on an undiscounted basis, trends and prospects of the Company's stations, as well as by comparing them to their competitors. The Company also takes into consideration recent acquisition patterns within the broadcast industry, the impact of recently enacted or potential FCC rules and regulations and any other events or circumstances which might indicate potential impact. At this time, in the opinion of management, no impairment has occurred. NOTE 4--RELATED PARTIES The company receives advances from and pays advances to its parent corporation and other related affiliated companies. In addition the Parent Corporation allocates expenses, based on revenue, to the company, which are related to corporate overhead and other costs related to the management and operation of the stations. The company has pledged substantially all of its assets as a cross guarantor on a variety of corporate obligations. F-126 COMMODORE MEDIA OF WESTCHESTER,INC. NOTES TO FINANCIAL STATEMENTS--(Continued) NOTE 5--COMMITMENTS Operating Leases The Company leases various tower facilities under operating leases, which do not currently have expiration dates. The Company also contracts for a variety of services and equipment through short-term agreements and leases under cash or barter arrangements. These agreements and leases are renewed or replaced at the end of their term at the discretion of management. Minimum future rentals under noncancelable operating leases having remaining terms in excess of one year for each of the next five years and in the aggregate are as follows: Year ended December 31, 1998............................................................... $16,152 1999............................................................... 16,182 2000............................................................... 7,500 2001............................................................... 7,500 2002............................................................... 7,500 ------- Total Minimum Lease Payments..................................... $54,834 =======
NOTE 6--PENSION PLAN The Company has a 401(k) Profit Sharing Plan covering all full time employees meeting eligibility requirements. The Company matches fifty percent of the employee's contributions up to six percent of compensation. F-127 INDEPENDENT AUDITORS' REPORT To the Stockholders Commodore Media of Westchester, Inc. We have audited the accompanying balance sheet of Commodore Media of Westchester, Inc. as of December 31, 1996, and the related statements of operations and accumulated deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Commodore Media of Westchester, Inc. as of December 31, 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. Weeks Holderbaum Huber & DeGraw LLP Bridgewater, New Jersey July 29, 1999 F-128 COMMODORE MEDIA OF WESTCHESTER, INC. BALANCE SHEET December 31, 1996 ASSETS CURRENT ASSETS: Cash............................................................ $ 38,700 Accounts receivable, less allowance for doubtful accounts of $153,050....................................................... 968,089 ----------- Total current assets.......................................... 1,006,789 PROPERTY, PLANT AND EQUIPMENT--NET................................ 1,695,979 INTANGIBLE ASSETS--NET............................................ 33,017,337 SECURITY DEPOSITS................................................. 8,114 ----------- Total assets.................................................. $35,728,219 =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITY: Accounts payable and accrued expenses........................... $ 324,482 DUE TO PARENT CORPORATION AND AFFILIATES.......................... 11,904,159 STOCKHOLDERS' EQUITY: Common stock, 100 shares authorized, issued, and outstanding.... 100 Additional paid in capital...................................... 23,596,134 Accumulated deficit............................................. (96,656) ----------- Total stockholders' equity.................................... 23,499,578 ----------- Total liabilities and stockholders' equity.................... $35,728,219 ===========
The Notes to Financial Statements are an Integral Part of this Statement F-129 COMMODORE MEDIA OF WESTCHESTER, INC. STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT For the year ended December 31, 1996 REVENUES: Broadcast revenue................................................ $4,684,186 Less: agency commissions......................................... (413,135) ---------- Net broadcast revenue.......................................... 4,271,051 Other non-broadcast revenue...................................... 132,530 ---------- Total revenue.................................................. 4,403,581 EXPENSES: Programming and technical........................................ 730,283 Sales and advertising............................................ 1,214,288 Administrative................................................... 749,771 ---------- Total expenses................................................. 2,694,342 ---------- INCOME FROM OPERATIONS............................................. 1,709,239 OTHER EXPENSES: Corporate management and overhead allocation..................... 1,146,542 Depreciation..................................................... 103,085 Amortization..................................................... 266,502 Interest expense................................................. 921,757 ---------- Total other expenses........................................... 2,437,886 ---------- NET LOSS........................................................... (728,647) RETAINED EARNINGS AT BEGINNING OF YEAR............................. 631,991 ---------- ACCUMULATED DEFICIT AT END OF YEAR................................. $ (96,656) ==========
The Notes to Financial Statements are an Integral Part of this Statement F-130 COMMODORE MEDIA OF WESTCHESTER, INC. STATEMENT OF CASH FLOWS For the year ended December 31, 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss......................................................... $(728,647) ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED BY OPERATING ACTIVITIES: Depreciation and amortization.................................... 369,586 Bad debt provision (recovery).................................... (29,850) Decrease in accounts receivable.................................. 90,290 Decrease in other current assets................................. 21,948 Increase in accounts payable..................................... 60,419 --------- Total adjustments.............................................. 512,393 --------- Net cash used by operating activities.......................... (216,254) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment............................... (139,917) CASH FLOWS FROM FINANCING ACTIVITIES: Net advances from parent corporation and affiliates.............. 366,402 --------- NET INCREASE IN CASH AND CASH EQUIVALENTS.......................... 10,231 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD................... 28,469 --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD......................... $ 38,700 =========
The Notes to Financial Statements are an Integral Part of this Statement F-131 COMMODORE MEDIA OF WESTCHESTER, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1--SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Business Commodore Media of Westchester, Inc. (the Company) operates several radio stations in Westchester County, New York. The signals licensed by the Federal Communications Commission (FCC) included in this presentation, operate by the call letters of WFAS-FM and WFAS-AM. The Company derives its revenue primarily from the sale of radio advertising. Sale of Stations In October 1996 the stations were purchased by Capstar Broadcasting in a business combination which was accounted for as a purchase. The result of the transaction is that the company is a wholly owned subsidiary of Capstar Broadcasting. The results of operations of the acquired stations are included in the accompanying financial statements for the entire period. The total cost of the acquisition, exceeded the fair value of the net assets of the stations by approximately $33,200,000 which has been allocated to the stations FCC license and goodwill. The excess in being amortized on the straight-line method over forty years. On April 2, 1998, the Company was sold to Westchester Radio LLC. who acquired the net assets and FCC license of WFAS-FM, WFAS-AM and WZZN-FM (the Stations) from Commodore Media of Westchester, Inc. in a business combination accounted for as a purchase. Revenue Recognition Broadcasting operations derive revenue primarily from the sale of program time and commercial announcements to local, regional and national advertisers. Revenue is recognized when the program and commercial announcements are broadcast. Advertising Costs The Company incurs various marketing and promotional costs to add and maintain listenership. These are expensed as incurred. Use of Estimates The process of preparing financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from those estimates. Concentration of Credit Risk The Company's business activity is with customers located within the immediate geographic area. Blocks of advertising time are generally sold on credit on standard business terms. F-132 COMMODORE MEDIA OF WESTCHESTER,INC. NOTES TO FINANCIAL STATEMENTS--(Continued) The Company's revenue and accounts receivable primarily relates to advertising of products and services within the radio stations' broadcast areas. The Company performs ongoing credit evaluations of its customers' financial condition and, generally requires no collateral from its customers. Credit losses have been within management's expectations and adequate allowances for any uncollectible accounts receivables are maintained. The radio broadcasting industry is subject to federal regulation by the Federal Communications Commission. These governmental regulations and policies could change over time and there can be no assurance that such changes would not have a material impact upon the Company. Property and Equipment The cost of property and equipment is depreciated over the estimated useful lives of the related assets. Leasehold improvements are depreciated over the lesser of the term of the related lease or the estimated useful lives of the assets. Depreciation is computed on straight line method for financial reporting purposes and double declining balance method for income tax purposes. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations. The useful lives of property and equipment for purposes of computing depreciation are: Office equipment................................................. 5-7 years Studio equipment................................................. 7 years Building, leasehold improvements and tower....................... 10-40 years
Income Taxes The Company files its income tax return on a consolidated basis with its parent company. Cash Flows For purposes of the statement of cash flows, cash equivalents include time deposits, certificates of deposits, and all highly liquid debt instruments with original maturities of three months or less. Cash paid for interest and income taxes are as follows: Interest........................................................... $ 921,757 Income taxes....................................................... --
Barter Transactions The Company barters unsold advertising time for products and services. Such transactions are recorded at the estimated fair value of the products or services received. Barter revenue is recorded when commercials are broadcast and related expenses are recorded when the bartered product or service is used. F-133 COMMODORE MEDIA OF WESTCHESTER,INC. NOTES TO FINANCIAL STATEMENTS--(Continued) The fair value of barter and trade-out transactions is included in broadcasting revenue and broadcasting expense. Barter transactions charged to operations were as follows: Trade sales....................................................... $ 671,622 Trade expense..................................................... (566,740) --------- Net Trade Revenue Transactions.................................. $ 104,882 =========
NOTE 2--PROPERTY, PLANT AND EQUIPMENT Property and equipment consisted of the following at December 31, 1996: Land............................................................. $ 420,000 Buildings and leasehold improvements............................. 639,766 Studio and transmission equipment................................ 536,162 Music library.................................................... 2,556 Office equipment and fixtures.................................... 118,862 ---------- Total.......................................................... 1,717,346 Less: accumulated depreciation................................... (21,367) ---------- Net Property and Equipment....................................... $1,695,979 ==========
Depreciation charged to operations amounted to $103,085. Property and equipment are pledged as collateral for various obligation of the company's corporate parent. (See Note 4). NOTE 3--INTANGIBLE ASSETS Intangible assets consisted of the following at December 31, 1996: FCC license..................................................... $33,157,140 Goodwill........................................................ 32,000 ----------- Total......................................................... 33,189,140 Less: accumulated amortization.................................. (171,803) ----------- Net Intangible Assets........................................... $33,017,337 ===========
Amortization charged to operations amounted to $266,502. The Company periodically evaluates intangible assets for potential impairment by analyzing the operating results, future cash flows on an undiscounted basis, trends and prospects of the Company's stations, as well as by comparing them to their competitors. The Company also takes into consideration recent acquisition patterns within the broadcast industry, the impact of recently enacted or potential FCC rules and regulations and any other events or circumstances which might indicate potential impact. At this time, in the opinion of management, no impairment has occurred. F-134 COMMODORE MEDIA OF WESTCHESTER,INC. NOTES TO FINANCIAL STATEMENTS--(Continued) NOTE 4--RELATED PARTIES The company receives advances from and pays advances to its parent corporation and other related affiliated companies. In addition the parent corporation allocates expenses, based on revenue, to the company, which are related to corporate overhead and other costs related to the management and operation of the stations. During 1996 these allocations amounted to approximately $834,000. The company has pledged substantially all of its assets as a cross guarantor on a variety of corporate obligations. NOTE 5--COMMITMENTS Operating Leases The Company leases various tower facilities under operating leases, which do not currently have expiration dates. The Company also contracts for a variety of services and equipment through short-term agreements and leases under cash or barter arrangements. These agreements and leases are renewed or replaced at the end of their term at the discretion of management. Minimum future rentals under noncancelable operating leases having remaining terms in excess of one year for each of the next five years and in the aggregate are as follows: Year ended December 31, 1997.............................................................. $11,710 1998.............................................................. 16,152 1999.............................................................. 16,182 2000.............................................................. 7,500 2001.............................................................. 7,500 ------- Total Minimum Lease Payments...................................... $59,044 =======
NOTE 6--PENSION PLAN The Company has a 401(k) Profit Sharing Plan covering all full time employees meeting eligibility requirements. The Company matches fifty percent of the employee's contributions up to six percent of compensation. F-135 INDEPENDENT AUDITORS' REPORT To the Division Manager of WRKI, WAXB, WPUT, WINE We have audited the accompanying combined balance sheet of WRKI, WAXB, WPUT, and WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) (the Divisions) as of May 29, 1998, and the related combined statements of operations and division equity and cash flows for the period of January 1, 1998 to May 29, 1998. These financial statements are the responsibility of the Divisions' management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of WRKI, WAXB, WPUT, and WINE as of May 29, 1998, and the results of their combined operations and their combined cash flows for the period of January 1, 1998 to May 29, 1998 in conformity with generally accepted accounting principles. Weeks Holderbaum Huber & DeGraw, LLP Bridgewater, New Jersey August 11, 1999 (except for Note 7, as to which the date is October 27, 1999) F-136 WRKI/WAXB/WPUT/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) COMBINED BALANCE SHEET May 29, 1998 ASSETS Current Assets: Cash............................................................. $ 800 Accounts receivable, less allowance for doubtful accounts of $129,800........................................................ 663,099 ----------- Total Current Assets........................................... 663,899 Property, Plant and Equipment, net................................. 1,980,776 Intangible Assets, net............................................. 7,754,987 Other Assets....................................................... 16,743 ----------- Total Assets..................................................... $10,416,405 =========== LIABILITIES AND DIVISION EQUITY Accounts payable and accrued expenses.............................. $ 129,385 Division Equity.................................................... 10,287,020 ----------- Total Liabilities and Division Equity.......................... $10,416,405 ===========
The Notes to Financial Statements are an Integral Part of this Statement F-137 WRKI/WAXB/WPUT/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) COMBINED STATEMENT OF OPERATIONS AND DIVISION EQUITY For the period of January 1, 1998 to May 29, 1998 Revenues: Broadcast revenue................................................ $ 1,466,199 Less: agency commissions......................................... (102,647) ----------- Net Broadcast Revenue.......................................... 1,363,552 Other non-broadcast revenue...................................... 11,894 ----------- Total Revenue.................................................. 1,375,446 Expenses: Programming and technical........................................ 172,226 Sales and advertising............................................ 573,055 Administrative................................................... 322,743 ----------- Total Expenses................................................. 1,068,024 ----------- Income from Operations............................................. 307,422 Other Expenses: Depreciation..................................................... 60,515 Amortization..................................................... 86,300 ----------- Total Other Expenses........................................... 146,815 ----------- Net Income..................................................... 160,607 Division Equity at Beginning of Period............................. 10,346,902 Net Advances to Parent & Affiliates................................ (220,489) ----------- Division Equity at End of Period................................... $10,287,020 ===========
The Notes to Financial Statements are an Integral Part of this Statement F-138 WRKI/WAXB/WPUT/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) COMBINED STATEMENT OF CASH FLOWS For the period of January 1, 1998 to May 29, 1998 Cash Flows from Operating Activities: Net Income........................................................ $160,607 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and amortization..................................... 146,473 Bad debt provision................................................ (102,102) Decrease in accounts receivable................................... 32,689 Decrease in other current assets.................................. 25,653 Decrease in accounts payable...................................... (40,785) -------- Total Adjustments................................................. 61,928 -------- Net Cash Provided by Operating Activities....................... 222,535 Cash Flows from Investing Activities: Purchase of property and equipment................................ (2,046) Cash Flows from Financing Activities: Net repayment of advances from parent corporation................. (220,489) -------- Net Decrease in Cash and Cash Equivalents......................... -- Cash and Cash Equivalents at Beginning of Period.................. 800 -------- Cash and Cash Equivalents at End of Period........................ $ 800 ========
The Notes to Financial Statements are an Integral Part of this Statement F-139 WRKI/WAXB/WPUT/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) NOTES TO FINANCIAL STATEMENTS NOTE 1--SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Business Commodore Media of Norwalk, Inc. (the Company) operates several radio stations in Connecticut and New York. The signals licensed by the FCC included in this presentation operate under the call letters of WRKI, WAXB, WPUT, and WINE (the Divisions). The Divisions derive their revenue primarily from the sale of radio advertising. Commodore Media of Norwalk, Inc. is a wholly owned subsidiary of Capstar Broadcasting. Contributions of Station Assets to Grantor Trust On May 29, 1998, Capstar Broadcasting Corporation contributed all of the rights, title, interest and obligations in all of the assets, properties, contracts, leases and agreements of the Divisions to the Capstar Trust. The company is the sole beneficiary of the trust. Revenue Recognition Broadcasting operations derive revenue primarily from the sale of program time and commercial announcements to local, regional and national advertisers. Revenue is recognized when the program and commercial announcements are broadcast. Advertising Costs The Divisions incur various marketing and promotional costs to add and maintain listenership. These costs are expensed as incurred. Use of Estimates The process of preparing financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from those estimates. Concentration of Credit Risk The Divisions' business activity is with customers located within the immediate geographic area. Blocks of advertising time are generally sold on credit on standard business terms. The Divisions' revenue and accounts receivable primarily relate to advertising of products and services within the radio stations' broadcast areas. The Divisions' perform ongoing credit evaluations of its customers' financial condition and, generally requires no collateral from its customers. Credit losses have been within management's expectations and adequate allowances for any uncollectible accounts receivables are maintained. The radio broadcasting industry is subject to federal regulation by the Federal Communications Commission. These governmental regulations and policies could change over time and there can be no assurance that such changes would not have a material impact upon the Divisions. F-140 WRKI/WAXB/WPUT/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) NOTES TO FINANCIAL STATEMENTS--(Continued) Property and Equipment The cost of property and equipment is depreciated over the estimated useful lives of the related assets. Leasehold improvements are depreciated over the lesser of the term of the related lease or the estimated useful lives of the assets. Depreciation is computed on the straight line method for financial reporting purposes and the double-declining balance method for income tax purposes. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations. The useful lives of property and equipment for purposes of computing depreciation are: Office equipment................................................. 5-7 years Studio equipment................................................. 7 years Building, leasehold improvements and tower....................... 10-40 years
Income Taxes The Divisions' file their income tax return on a consolidated basis with their parent company. Cash Flows For purposes of the statement of cash flows, cash equivalents include time deposits, certificates of deposits, and all highly liquid debt instruments with original maturities of three months or less. The Divisions incurred no interest expense or income taxes in the reporting period. Barter Transactions The Divisions barter unsold advertising time for products and services. Such transactions are recorded at the estimated fair value of the products or services received. Barter revenue is recorded when commercials are broadcast and related expenses are recorded when the bartered product or service is used. The fair value of barter and trade-out transactions is included in broadcasting revenue and broadcasting expense. Barter transactions charged to operations were as follows for the period of January 1, 1998 to January 29, 1998: Trade sales...................................................... $ 256,669 Trade expense.................................................... (258,173) --------- Net trade expense transactions................................. $ (1,504) =========
F-141 WRKI/WAXB/WPUT/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) NOTES TO FINANCIAL STATEMENTS--(Continued) NOTE 2--PROPERTY, PLANT AND EQUIPMENT Property and equipment consisted of the following at May 29, 1998: Land............................................................. $ 339,214 Buildings and leasehold improvements............................. 644,746 Studio and transmission equipment................................ 1,117,583 Music library.................................................... 2,283 Office equipment and fixtures.................................... 101,998 ---------- Total.......................................................... 2,205,824 Less: accumulated depreciation................................... (225,048) ---------- Net Property and Equipment....................................... $1,980,776 ==========
Property and equipment are pledged as collateral for various obligation of the divisions' corporate parent. (See Note 4). NOTE 3--INTANGIBLE ASSETS Intangible assets consisted of the following at May 29, 1998: FCC license...................................................... $8,003,448 Transmitter Site Lease........................................... 56,108 Goodwill......................................................... 32,000 ---------- Total.......................................................... 8,091,556 Less: accumulated amortization................................... (336,569) ---------- Net Intangible Assets............................................ $7,754,987 ==========
The Divisions periodically evaluate intangible assets for potential impairment by analyzing the operating results, future cash flows on an undiscounted basis, trends and prospects of the Divisions, as well as by comparing them to their competitors. The Divisions also take into consideration recent acquisition patterns within the broadcast industry, the impact of recently enacted or potential FCC rules and regulations and any other events or circumstances which might indicate potential impact. At this time, in the opinion of management, no impairment has occurred. NOTE 4--RELATED PARTIES The Divisions receive advances from and pays advances to its parent corporation and other related affiliated companies. In addition, the parent corporation allocates expenses to the divisions based on revenue, which are related to corporate overhead and other costs related to the management and operation of the stations. The net assets of the station have been pledged on guarantees of various obligations of the corporate parent. F-142 WRKI/WAXB/WPUT/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) NOTES TO FINANCIAL STATEMENTS--(Continued) NOTE 5--COMMITMENTS Operating Leases The Divisions lease various tower facilities under operating leases, which do not currently have expiration dates. The Divisions also contract for a variety of services and equipment through short-term agreements and leases under cash or barter arrangements. These agreements and leases are renewed or replaced at the end of their term at the discretion of management. Total rent expense for the period of January 1, 1998 to May 29, 1998 was approximately $16,000. Minimum future rentals under noncancelable operating leases having remaining terms in excess of one year for each of the next five years and in the aggregate are as follows: Year ended December 31, 1999............................................................. $ 40,427 2000............................................................. 41,017 2001............................................................. 42,029 2002............................................................. 43,094 2003............................................................. 43,605 -------- Total Minimum Lease Payments................................... $210,172 ========
NOTE 6--PENSION PLAN The Divisions have a 401(k) Profit Sharing Plan covering all full time employees meeting eligibility requirements. The Company matches fifty percent of the employee's contributions up to six percent of compensation. NOTE 7--SUBSEQUENT SALE OF CAPSTAR TRUST On October 27, 1999, the tangible assets, FCC license and goodwill of Capstar Trust were purchased by Aurora of Danbury, L.L.C. The total cost of the acquisition was $11,250,000. F-143 INDEPENDENT AUDITORS' REPORT To the Division Manager of WRKI, WAXB, WPUT, WINE We have audited the accompanying combined balance sheet of WRKI, WAXB, WPUT, and WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) as of December 31, 1997, and the related combined statements of operations and division equity and cash flows for the year then ended. These financial statements are the responsibility of the Divisions' management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of WRKI, WAXB, WPUT, and WINE as of December 31, 1997, and the results of their combined operations and their combined cash flows for the year then ended in conformity with generally accepted accounting principles. Weeks Holderbaum Huber & DeGraw LLP Bridgewater, New Jersey August 11, 1999 (except for Note 7, as to which the date is October 27, 1999) F-144 WRKI/WAXB/WPUT/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) COMBINED BALANCE SHEET December 31, 1997 ASSETS CURRENT ASSETS: Cash............................................................. $ 800 Accounts receivable, less allowance for doubtful accounts of $231,902........................................................ 593,685 ----------- Total current assets........................................... 594,485 PROPERTY, PLANT AND EQUIPMENT, NET................................. 2,038,905 INTANGIBLE ASSETS, NET............................................. 7,841,285 OTHER ASSETS....................................................... 42,397 ----------- Total assets................................................... $10,517,072 =========== LIABILITIES AND DIVISION EQUITY ACCOUNTS PAYABLE AND ACCRUED EXPENSES.............................. $ 170,170 DIVISION EQUITY.................................................... 10,346,902 ----------- Total liabilities and division equity.......................... $10,517,072 ===========
The Notes to Financial Statements are an Integral Part of this Statement F-145 WRKI/WAXB/WPUT/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) COMBINED STATEMENT OF OPERATIONS AND DIVISION EQUITY For the year ended December 31, 1997 Revenues: Broadcast revenue................................................ $ 3,975,767 Less: agency commissions......................................... (275,662) ----------- Net broadcast revenue.......................................... 3,700,105 Other non-broadcast revenue...................................... 15,754 ----------- Total revenue.................................................. 3,715,859 Expenses: Programming and technical........................................ 833,852 Sales and advertising............................................ 1,161,616 Administrative................................................... 1,069,475 ----------- Total expenses................................................. 3,064,943 ----------- Income from operations............................................. 650,916 Other expenses: Depreciation..................................................... 137,724 Amortization..................................................... 207,120 ----------- Total other expenses........................................... 344,844 ----------- Net income......................................................... 306,072 Division equity at beginning of year............................... 10,891,563 Net advances to parent and affiliates.............................. (850,733) ----------- Division equity at end of year..................................... $10,346,902 ===========
The Notes to Financial Statements are an Integral Part of this Statement F-146 WRKI/WAXB/WPUT/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) COMBINED STATEMENT OF CASH FLOWS For the year ended December 31, 1997 Cash flows from operating activities: Net income......................................................... $ 306,072 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.................................... 344,745 Bad debt provision............................................... 11,384 Decrease in accounts receivable.................................. 190,802 Increase in other current assets................................. (11,778) Decrease in accounts payable..................................... (19,796) --------- Total adjustments.............................................. 515,357 --------- Net cash provided by operating activities...................... 821,429 Cash flows from investing activities: Purchase of property and equipment............................... (97,118) Cash flows from financing activities: Net repayment of advances to parent and affiliates............... (850,733) --------- NET DECREASE IN CASH AND CASH EQUIVALENTS...................... (126,422) Cash and cash equivalents at beginning of period................... 127,222 --------- Cash and cash equivalents at end of period......................... $ 800 =========
The Notes to Financial Statements are an Integral Part of this Statement F-147 WRKI/WAXB/WPUT/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) NOTES TO FINANCIAL STATEMENTS NOTE 1--SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Business Commodore Media of Norwalk, Inc. (the Company) operates several radio stations in Connecticut and New York. The signals licensed by the FCC included in this presentation operate under the call letters of WRKI, WAXB, WPUT, and WINE (the Divisions). The Divisions derive their revenue primarily from the sale of radio advertising. Commodore Media of Norwalk, Inc. is a wholly owned subsidiary of Capstar Broadcasting. Transfer of Signals and Assets to Grantor Trust On January 1, 1997, the net assets of WZZN were transferred by the parent corporation to Commodore Media of Westchester, Inc. On May 29, 1998, Capstar Broadcasting Corporation contributed all of the rights, title, interest and obligations in all of the assets, properties, contracts, leases and agreements of the Divisions to the Capstar Trust. The company is the sole beneficiary of the trust. Revenue Recognition Broadcasting operations derive revenue primarily from the sale of program time and commercial announcements to local, regional and national advertisers. Revenue is recognized when the program and commercial announcements are broadcast. Advertising Costs The Divisions incur various marketing and promotional costs to add and maintain listenership. These costs are expensed as incurred. Use of Estimates The process of preparing financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from those estimates. Concentration of Credit Risk The Divisions' business activity is with customers located within the immediate geographic area. Blocks of advertising time are generally sold on credit on standard business terms. The Divisions' revenue and accounts receivable primarily relates to advertising of products and services within the radio stations' broadcast areas. The Divisions perform ongoing credit evaluations of its customers' financial condition and, generally requires no collateral from its customers. Credit losses have been within management's expectations and adequate allowances for any uncollectible accounts receivables are maintained. F-148 WRKI/WAXB/WPUT/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) NOTES TO FINANCIAL STATEMENTS--(Continued) The radio broadcasting industry is subject to federal regulation by the Federal Communications Commission. These governmental regulations and policies could change over time and there can be no assurance that such changes would not have a material impact upon the Divisions. Property and Equipment The cost of property and equipment is depreciated over the estimated useful lives of the related assets. Leasehold improvements are depreciated over the lesser of the term of the related lease or the estimated useful lives of the assets. Depreciation is computed on the straight line method for financial reporting purposes and the double declining balance method for income tax purposes. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations. The useful lives of property and equipment for purposes of computing depreciation are: Office equipment................................................. 5-7 years Studio equipment................................................. 7 years Building, leasehold improvements and tower....................... 10-40 years
Income Taxes The Divisions file their income tax return on a consolidated basis with their parent company. Cash Flows For purposes of the statement of cash flows, cash equivalents include time deposits, certificates of deposits, and all highly liquid debt instruments with original maturities of three months or less. The Divisions incurred no interest expense or income taxes in the reported period. Barter Transactions The Divisions barter unsold advertising time for products and services. Such transactions are recorded at the estimated fair value of the products or services received. Barter revenue is recorded when commercials are broadcast and related expenses are recorded when the bartered product or service is used. The fair value of barter and trade-out transactions is included in broadcasting revenue and broadcasting expense. Barter transactions charged to operations for the year ended December 31, 1997 were as follows: Trade sales....................................................... $ 514,208 Trade expense..................................................... (482,143) --------- Net Trade Revenue Transactions.................................. $ 32,065 =========
F-149 WRKI/WAXB/WPUT/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) NOTES TO FINANCIAL STATEMENTS--(Continued) NOTE 2--PROPERTY, PLANT AND EQUIPMENT Property and equipment consisted of the following at December 31, 1997: Land............................................................. $ 339,214 Buildings and leasehold improvements............................. 644,746 Studio and transmission equipment................................ 1,115,975 Music library.................................................... 2,283 Office equipment and fixtures.................................... 101,560 ---------- Total.......................................................... 2,203,778 Less: accumulated depreciation................................... (164,873) ---------- Net Property and Equipment....................................... $2,038,905 ==========
Property and equipment are pledged as collateral for various obligation of the divisions' corporate parent. (See Note 4). NOTE 3--INTANGIBLE ASSETS Intangible assets consisted of the following at December 31, 1997: FCC license...................................................... $8,003,448 Transmitter site lease........................................... 56,108 Goodwill......................................................... 32,000 ---------- Total.......................................................... 8,091,556 Less: accumulated amortization................................... (250,271) ---------- Net Intangible Assets............................................ $7,841,285 ==========
The Divisions periodically evaluate intangible assets for potential impairment by analyzing the operating results, future cash flows on an undiscounted basis, trends and prospects of the Divisions, as well as by comparing them to their competitors. The Divisions also take into consideration recent acquisition patterns within the broadcast industry, the impact of recently enacted or potential FCC rules and regulations and any other events or circumstances which might indicate potential impact. At this time, in the opinion of management, no impairment has occurred. NOTE 4--RELATED PARTIES The divisions receive advances from and pays advances to its parent corporation and other related affiliated companies. In addition the parent corporation allocates expenses to the divisions based on revenue, which are related to corporate overhead and other costs related to the management and operation of the stations. The net assets of the Station have been pledged on guarantees of various obligations of the corporate parent. F-150 WRKI/WAXB/WPUT/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) NOTES TO FINANCIAL STATEMENTS--(Continued) NOTE 5--COMMITMENTS Operating Leases The Divisions lease various tower facilities under operating leases, which do not currently have expiration dates. Total rent expense for 1997 was approximately $35,500. The Divisions also contract for a variety of services and equipment through short-term agreements and leases under cash or barter arrangements. These agreements and leases are renewed or replaced at the end of their term at the discretion of management. Minimum future rentals under noncancelable operating leases having remaining terms in excess of one year for each of the next five years and in the aggregate are as follows: Year ended December 31, 1998............................................................. $ 37,625 1999............................................................. 40,427 2000............................................................. 41,017 2001............................................................. 42,029 2002............................................................. 43,094 -------- Total Minimum Lease Payments................................... $204,192 ========
NOTE 6--PENSION PLAN The Divisions have a 401(k) Profit Sharing Plan covering all full time employees meeting eligibility requirements. The Company matches fifty percent of the employee's contributions up to six percent of compensation. NOTE 7--SUBSEQUENT SALE OF CAPSTAR TRUST On October 27, 1999, the tangible assets, FCC license and goodwill of Capstar Trust were purchased by Aurora of Danbury, L.L.C. The total cost of the acquisition was $11,250,000. F-151 INDEPENDENT AUDITORS' REPORT To the Division Manager of WRKI, WAXB, WPUT, WZZN, WINE We have audited the accompanying combined balance sheet of WRKI, WAXB, WPUT, WZZN and WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) (the Divisions) as of December 31, 1996, and the related combined statements of operations and division equity and cash flows for the year then ended. These financial statements are the responsibility of the Divisions' management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of WRKI, WAXB, WPUT, WZZN, and WINE as of December 31, 1996, and the results of their combined operations and their combined cash flows for the year then ended in conformity with generally accepted accounting principles. Weeks Holderbaum Huber & DeGraw LLP Bridgewater, New Jersey August 11, 1999 (except for Note 7, as to which the date is October 27, 1999) F-152 WRKI/WAXB/WPUT/WZZN/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) COMBINED BALANCE SHEET December 31, 1996 ASSETS CURRENT ASSETS: Cash............................................................. $ 127,222 Accounts receivable, less allowance for doubtful accounts of $220,518........................................................ 795,871 ----------- Total current assets........................................... 923,093 PROPERTY, PLANT AND EQUIPMENT, NET................................. 2,079,411 INTANGIBLE ASSETS, NET............................................. 8,048,406 OTHER ASSETS....................................................... 30,619 ----------- Total assets................................................... $11,081,529 =========== LIABILITIES AND DIVISION EQUITY Accounts payable and accrued expenses.............................. $ 189,966 Division equity.................................................... 10,891,563 ----------- Total liabilities and division equity.......................... $11,081,529 ===========
The Notes to Financial Statements are an Integral Part of this Statement F-153 WRKI/WAXB/WPUT/WZZN/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) COMBINED STATEMENT OF OPERATIONS AND DIVISION EQUITY For the year ended December 31, 1996 Revenues: Broadcast revenue................................................ $ 4,151,424 Less: agency commissions......................................... (304,903) ----------- Net broadcast revenue.......................................... 3,846,521 Other non-broadcast revenue...................................... 41,410 ----------- Total revenue.................................................. 3,887,931 Expenses: Programming and technical........................................ 925,407 Sales and advertising............................................ 1,436,296 Administrative................................................... 1,098,778 ----------- Total expenses................................................. 3,460,481 ----------- Income from operations............................................. 427,450 Other expenses: Depreciation..................................................... 137,724 Amortization..................................................... 207,120 ----------- Total other expenses........................................... 344,844 ----------- Net income......................................................... 82,606 Division equity at beginning of year............................... 10,808,957 ----------- Division equity at end of year..................................... $10,891,563 ===========
The Notes to Financial Statements are an Integral Part of this Statement F-154 WRKI/WAXB/WPUT/WZZN/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) COMBINED STATEMENT OF CASH FLOWS For the year ended December 31, 1996 Cash flows from operating activities: Net income......................................................... $ 82,606 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.................................... 344,844 Bad debt provision............................................... 162,696 Increase in accounts receivable.................................. (489,817) Increase in other current assets................................. (29,081) Increase in accounts payable..................................... 138,875 --------- Total adjustments.............................................. 127,517 --------- Net cash provided by operating activities...................... 210,123 Cash flows from investing activities: Purchase of property and equipment............................... (10,879) Cash flows from financing activities: Net repayment of advances from equity holder..................... (231,407) --------- Net decrease in cash and cash equivalents.......................... (32,163) Cash and cash equivalents at beginning of period................... 159,385 --------- Cash and cash equivalents at end of period......................... $ 127,222 =========
The Notes to Financial Statements are an Integral Part of this Statement F-155 WRKI/WAXB/WPUT/WZZN/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) NOTES TO FINANCIAL STATEMENTS NOTE 1--SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Business Commodore Media of Norwalk, Inc. (the Company) operates several radio stations in Connecticut and New York. The signals licensed by the FCC included in this presentation operate under the call letters of WRKI, WAXB, WPUT, WZZN, and WINE (the Divisions). The Divisions derive their revenue primarily from the sale of radio advertising. Sale of Stations In October 1996, Commodore Media of Norwalk, Inc. was purchased by Capstar Broadcasting in a business combination which was accounted for as a purchase. Pursuant to this transaction the Company became a wholly owned subsidiary of Capstar Broadcasting. During 1997, the net assets of WZZN were transferred by the parent corporation to Commodore Media of Westchester, Inc., an entity affiliated by common ownership. The results of operations of the acquired Divisions are included in the accompanying financial statements for the entire year. The total cost of the acquisition, exceeded the fair value of the net assets of the stations by approximately $8,100,000, which has been allocated to the stations FCC license and goodwill. The excess is being amortized on the straight-line method over forty years. On May 29, 1998, Capstar Broadcasting contributed all of the rights, title, interest and obligations in all of the assets, properties, contrasts, leases and agreements of the Divisions to Capstar Trust. Revenue Recognition Broadcasting operations derive revenue primarily from the sale of program time and commercial announcements to local, regional and national advertisers. Revenue is recognized when the program and commercial announcements are broadcast. Advertising Costs The Divisions incur various marketing and promotional costs to add and maintain listenership. These costs are expensed as incurred. Use of Estimates The process of preparing financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from those estimates. F-156 WRKI/WAXB/WPUT/WZZN/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) NOTES TO FINANCIAL STATEMENTS--(Continued) Concentration of Credit Risk The Divisions' business activity is with customers located within the immediate geographic area. Blocks of advertising time are generally sold on credit on standard business terms. The Divisions' revenue and accounts receivable primarily relate to advertising of products and services within the radio stations' broadcast areas. The Divisions perform ongoing credit evaluations of their customers' financial condition and, generally requires no collateral from its customers. Credit losses have been within management's expectations and adequate allowances for any uncollectible accounts receivables are maintained. The radio broadcasting industry is subject to federal regulation by the Federal Communications Commission. These governmental regulations and policies could change over time and there can be no assurance that such changes would not have a material impact upon the Divisions. Property and Equipment The cost of property and equipment is depreciated over the estimated useful lives of the related assets. Leasehold improvements are depreciated over the lesser of the term of the related lease or the estimated useful lives of the assets. Depreciation is computed on the straight line method for financial reporting purposes and the double-declining balance method for income tax purposes. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations. The useful lives of property and equipment for purposes of computing depreciation are: Office equipment and fixtures.................................... 5-7 years Studio equipment................................................. 7 years Building, leasehold improvements and tower....................... 10-40 years
Income Taxes The Divisions file their income tax return on a consolidated basis with their parent company. Cash Flows For purposes of the statement of cash flows, cash equivalents include time deposits, certificates of deposits, and all highly liquid debt instruments with original maturities of three months or less. The Divisions incurred no interest or income taxes in the reporting period. Barter Transactions The Divisions barter unsold advertising time for products and services. Such transactions are recorded at the estimated fair value of the products or services received. Barter revenue is recorded when commercials are broadcast and related expenses are recorded when the bartered product or service is used. F-157 WRKI/WAXB/WPUT/WZZN/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) NOTES TO FINANCIAL STATEMENTS--(Continued) The fair value of barter and trade-out transactions is included in broadcasting revenue and broadcasting expense. Barter transactions charged to operations for the period ended December 31, 1996 were as follows: Trade sales....................................................... $ 484,265 Trade expense..................................................... (413,279) --------- Net trade revenue transactions.................................. $ 70,986 =========
NOTE 2--PROPERTY, PLANT AND EQUIPMENT Property and equipment consisted of the following at December 31, 1996: Land............................................................. $ 339,214 Buildings and leasehold improvements............................. 642,306 Studio and transmission equipment................................ 1,026,649 Music library.................................................... 2,217 Office equipment and fixtures.................................... 96,274 ---------- Total.......................................................... 2,106,660 Less: accumulated depreciation................................... (27,249) ---------- Net property and equipment....................................... $2,079,411 ==========
Property and equipment are pledged as collateral for various obligation of the divisions' corporate parent. (See Note 4). NOTE 3--INTANGIBLE ASSETS Intangible assets consisted of the following at December 31, 1996: FCC license...................................................... $8,003,448 Goodwill......................................................... 32,000 Transmitter site lease........................................... 56,108 ---------- Total.......................................................... 8,091,556 Less: accumulated amortization................................... (43,150) ---------- Net intangible assets............................................ $8,048,406 ==========
The Divisions periodically evaluate intangible assets for potential impairment by analyzing the operating results, future cash flows on an undiscounted basis, trends and prospects of the Divisions stations, as well as by comparing them to their competitors. The Divisions also take into consideration recent acquisition patterns within the broadcast industry, the impact of recently enacted or potential FCC rules and regulations and any other events or circumstances which might indicate potential impact. At this time, in the opinion of management, no impairment has occurred. F-158 WRKI/WAXB/WPUT/WZZN/WINE (Operating Divisions of Commodore Media of Norwalk, Inc.) NOTES TO FINANCIAL STATEMENTS--(Continued) NOTE 4--RELATED PARTIES The Divisions receive advances from and pay advances to their parent corporation and other related affiliated companies. In addition the parent corporation allocates expenses to the divisions based on revenue, which are related to corporate overhead and other costs related to the management and operation of the stations. The net assets of the stations have been pledged as guarantees of various obligations of the corporate parent. NOTE 5--COMMITMENTS Operating Leases The Divisions lease various tower facilities under operating leases, which do not currently have expiration dates. Total Rent expense for 1996 was approximately $30,000. The Divisions also contracts for a variety of services and equipment through short-term agreements and leases under cash or barter arrangements. These agreements and leases are renewed or replaced at the end of their term at the discretion of management. Minimum future rentals under noncancelable operating leases having remaining terms in excess of one year for each of the next five years and in the aggregate are as follows: Year ended December 31, 1997............................................................. $ 35,453 1998............................................................. 37,625 1999............................................................. 40,427 2000............................................................. 41,017 2001............................................................. 42,029 -------- Total minimum lease payments................................... $196,551 ========
NOTE 6--PENSION PLAN The Divisions have a 401(k) Profit Sharing Plan covering all full time employees meeting eligibility requirements. The Divisions matches fifty percent of the employee's contributions up to six percent of compensation. NOTE 7--SUBSEQUENT SALE OF CAPSTAR TRUST On October 27, 1999, the tangible assets, FCC license and goodwill of Capstar Trust were purchased by Aurora of Danbury, L.L.C. The total cost of the acquisition was $11,250,000. F-159 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Through and including , 2000 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. ----------------- PROSPECTUS ----------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12,425,000 Shares Nassau Broadcasting Corporation Class A Common Stock Merrill Lynch & Co. Salomon Smith Barney Banc of America Securities LLC Lazard Prudential Volpe Technology a unit of Prudential Securities , 2000 ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +The information in this prospectus is not complete and may be changed. We may + +not sell these securities until the registration statement filed with the + +Securities and Exchange Commission is effective. This prospectus is not an + +offer to sell these securities and it is not soliciting an offer to buy these + +securities in any state where the offer or sale is not permitted. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Alternative Page for International Prospectus Subject to Completion Preliminary Prospectus dated June 28, 2000 P R O S P E C T U S 12,425,000 Shares Nassau Broadcasting Corporation Class A Common Stock ----------- This is Nassau's initial public offering. Nassau is selling all of the shares. The international managers are offering 2,485,000 shares outside the U.S. and Canada and the U.S. underwriters are offering 9,940,000 shares in the U.S. and Canada. We expect the public offering price to be between $16 and $19 per share. Currently, no public market exists for the shares. After pricing of the offering, we expect that the shares will be quoted on the Nasdaq National Market under the symbol "NBCR." Investing in the class A common stock involves risks that are described in the "Risk Factors" section beginning on page 11 of this prospectus. -----------
Per Share Total --------- ----- Public offering price............................. $ $ Underwriting discount............................. $ $ Proceeds, before expenses, to Nassau.............. $ $
The international managers may also purchase up to an additional 372,750 shares from Nassau at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover over- allotments. The U.S. underwriters may similarly purchase up to an additional 1,419,000 shares from Nassau. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The shares of class A common stock will be ready for delivery on or about , 2000. ----------- Merrill Lynch International Schroder Salomon Smith Barney ----------- Bank of America International Limited Lazard Prudential-Bache International The date of this prospectus is , 2000. Alternative Page for International Prospectus UNDERWRITING We intend to offer the shares outside the U.S. and Canada through the international managers and in the U.S. and Canada through the U.S. underwriters. Merrill Lynch International, Salomon Brothers International Limited, Bank of America International Limited, Lazard Capital Markets and Prudential-Bache International Limited are acting as lead managers for the international managers named below. Subject to the terms and conditions described in an international purchase agreement among us and the international managers, and concurrently with the sale of 9,940,000 shares to the U.S. underwriters, we have agreed to sell to the international managers, and the international managers severally have agreed to purchase from us, the number of shares listed opposite their names below.
Number International Manager of Shares --------------------- --------- Merrill Lynch International..................................... Salomon Brothers International Limited.......................... Bank of America International Limited........................... Lazard Capital Markets.......................................... Prudential-Bache International Limited.......................... --------- Total...................................................... 2,485,000 =========
We have also entered into a U.S. purchase agreement with the U.S. underwriters, for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated, Salomon Smith Barney Inc., Banc of America Securities LLC, Lazard Freres & Co. LLC and Prudential Securities Incorporated are acting as U.S. representatives, for sale of the shares in the U.S. and Canada. Subject to the terms and conditions in the U.S. purchase agreement, and concurrently with the sale of 2,485,000 shares to the international managers pursuant to the international purchase agreement, we have agreed to sell to the U.S. underwriters, and the U.S. underwriters severally have agreed to purchase 9,940,000 shares from us. The initial public offering price per share and the total underwriting discount per share are identical under the international purchase agreement and the U.S. purchase agreement. The international managers and the U.S. underwriters have agreed to purchase all of the shares sold under the international and U.S. purchase agreements if any of these shares are purchased. If an underwriter defaults, the international and U.S. purchase agreements provide that the purchase commitments of the nondefaulting underwriters may be increased or the purchase agreements may be terminated. The closings for the sale of shares to be purchased by the international managers and the U.S. underwriters are conditioned on one another. We have agreed to indemnify the international managers and the U.S. underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the international managers and U.S. underwriters may be required to make in respect of those liabilities. The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the purchase agreements, such as the receipt by the underwriters of officer's certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part. Schroders is a trademark of Schroders Holdings plc and is used under license by Salomon Smith Barney. Commissions and Discounts The lead managers have advised us that the international managers propose initially to offer the shares to the public at the initial public offering price on the cover page of this prospectus and to dealers at that price less a concession not in excess of $ per share. The international managers may allow, and the dealers may reallow, a discount not in excess of $ per share to other dealers. After the initial public offering, the public offering price, concession and discount may be changed. A-2 Alternative Page for International Prospectus The following table shows the public offering price, underwriting discount and proceeds before expenses to Nassau. In addition, the table includes certain other items considered by the NASD to be underwriting compensation for purposes of the NASD's Conduct Rules. The information assumes either no exercise or full exercise by the international managers and the U.S. underwriters of their over-allotment options.
Per Share Without Option With Option --------- -------------- ----------- Public offering price.................. $ $ $ Underwriting discount.................. $ $ $ Proceeds, before expenses, to Nassau... $ $ $ Other items............................
Merrill Lynch Capital Corporation, an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated, owns 39,806 shares of our class A common stock which were received upon conversion of limited partnership units acquired in connection with our recapitalization. The compensation in the table above in the line titled "other items" was computed based on the difference between the $ offering price and $ , the price deemed to be paid for the shares of class A common stock held by Merrill Lynch Capital Corporation. The expenses of the offering, not including the underwriting discount, are estimated at $1,920,000 and are payable by us, as set forth in the following table. SEC registration fee................................................ $ 62,324 NASD filing fee..................................................... 22,300 Nasdaq National Market listing fee.................................. 87,000 Printing and engraving expenses..................................... 400,000 Legal fees and expenses............................................. 600,000 Accounting fees and expenses........................................ 550,000 Blue sky fees and expenses (including legal fees)................... 7,500 Transfer agent and registrar fees and expenses...................... 3,500 Premiums for director and officer insurance......................... 175,883 Miscellaneous....................................................... 11,493 ---------- Total............................................................. $1,920,000 ==========
Over-allotment Option We have granted an option to the international managers to purchase up to 372,750 additional shares at the public offering price less the underwriting discount. The international managers may exercise this option for 30 days from the date of this prospectus solely to cover any over-allotments. If the international managers exercise this option, each will be obligated, subject to conditions contained in the purchase agreements, to purchase a number of additional shares proportionate to that international manager's initial amount reflected in the above table. We have also granted an option to the U.S. underwriters, exercisable for 30 days from the date of this prospectus, to purchase up to 1,491,000 additional shares to cover any over-allotments on terms similar to those granted to the international managers. Intersyndicate Agreement The international managers and the U.S. underwriters have entered into an intersyndicate agreement that provides for the coordination of their activities. Under the intersyndicate agreement, the international managers and the U.S. underwriters may sell shares to each other for purposes of resale at the initial public A-3 Alternative Page for International Prospectus offering price, less an amount not greater than the selling concession. Under the intersyndicate agreement, the international managers and any dealer to whom they sell shares will not offer to sell or sell shares to persons who are U.S. or Canadian persons or to persons they believe intend to resell to persons who are U.S. or Canadian persons, except in the case of transactions under the intersyndicate agreement. Similarly, the U.S. underwriters and any dealer to whom they sell shares will not offer to sell or sell shares to non-U.S. persons or non-Canadian persons or to persons they believe intend to resell to non-U.S. or non-Canadian persons, except in the case of transactions under the intersyndicate agreement. Reserved Shares At our request, the underwriters have reserved for sale, at the initial public offering price, up to shares offered by this prospectus for sale to some of our directors, officers, employees and business associates. If these persons purchase reserved shares, this will reduce the number of shares available for sale to the general public. Any reserved shares that are not orally confirmed for purchase within one day of the pricing of this offering will be offered by the underwriters to the general public on the same terms as the other shares offered by this prospectus. Purchasers of shares pursuant to the reserved share program generally will not be subject to lock-up agreements in respect of the shares so purchased unless required by the Conduct Rules of the NASD. The NASD's Conduct Rules will require that some purchasers of shares who are affiliated or associated with NASD members or who hold senior positions at financial institutions or members of their immediate families be subject to three-month lock-up agreements. No Sales of Similar Securities We and our executive officers and directors and most of our existing stockholders have agreed, with limited exceptions, not to sell or transfer any common stock for 180 days after the date of this prospectus without first obtaining the written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon Smith Barney Inc. Specifically, we and these other individuals have agreed not to directly or indirectly . offer, pledge, sell or contract to sell any common stock, other than common stock issued by us in connection with our purchase of Aurora Communications; . sell any option or contract to purchase any common stock; . purchase any option or contract to sell any common stock; . grant any option, right or warrant for the sale of any common stock, other than pursuant to our stock incentive plan; . lend or otherwise dispose of or transfer any common stock; . request or demand that we file a registration statement related to any common stock; or . enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of any common stock whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or otherwise. This lockup provision applies to common stock and to securities convertible into or exchangeable or exercisable for or repayable with common stock. It also applies to common stock owned now or acquired later by the person executing the agreement or for which the person executing the agreement later acquires the power of disposition. Quotation on the Nasdaq National Market We expect the shares to be approved for quotation on the Nasdaq National Market, subject to notice of issuance, under the symbol "NBCR." A-4 Alternative Page for International Prospectus Before this offering, there has been no public market for our class A common stock. The initial public offering price will be determined through negotiations among us and the U.S. representatives and lead managers. In addition to prevailing market conditions, the primary factors to be considered in determining the initial public offering price are . the valuation multiples of publicly traded companies that the U.S. representatives and the lead managers believe to be comparable to us; . our financial information; . the history of, and the prospects for, our company and the industry in which we compete; . an assessment of our management, its past and present operations, and the prospects for, and timing of, our future revenues; . the present state of our development; . the general condition of the securities market at the time of this offering; and . the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours. An active trading market for the shares may not develop. It is also possible that after the offering the shares will not trade in the public market at or above the initial public offering price. UK Selling Restrictions Each international manager has agreed that . it has not offered or sold and will not offer or sell any shares of shares of our class A common stock to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which do not constitute an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; . it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the class A common stock in, from or otherwise involving the United Kingdom; and . it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issuance of class A common stock to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 as amended by the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1997 or is a person to whom such document may otherwise lawfully be issued or passed on. No Public Offering Outside the United States No action has been or will be taken in any jurisdiction (except in the United States) that would permit a public offering of the shares of class A common stock, or the possession, circulation or distribution of this prospectus or any other material relating to us or shares of our class A common stock in any jurisdiction where action for that purpose is required. Accordingly, the shares of our class A common stock may not be offered or sold, directly or indirectly, and neither this prospectus nor any other offering material or advertisements in connection with the shares of our class A common stock may be distributed or published, in or from any country or jurisdiction except in compliance with any applicable rules and regulations of that country or jurisdiction. A-5 Alternative Page for International Prospectus You may be required to pay stamp taxes and other charges in accordance with the laws and practices of the country of purchase in addition to the offering price on the cover of this prospectus. Price Stabilization, Short Positions and Penalty Bids Until the distribution of the shares is completed, SEC rules may limit underwriters and selling group members from bidding for and purchasing our class A common stock. However, the U.S. representatives may engage in transactions that stabilize the price of the class A common stock, such as bids or purchases to peg, fix or maintain that price. If the underwriters create a short position in the class A common stock in connection with the offering, i.e., if they sell more shares than are listed on the cover of this prospectus, the U.S. representatives may reduce that short position by purchasing shares in the open market. The U.S. representatives may also elect to reduce any short position by exercising all or part of the over- allotment options described above. Purchases of the class A common stock to stabilize its price or to reduce a short position may cause the price of the class A common stock to be higher than it might be in the absence of such purchases. The U.S. representatives may also impose a penalty bid on underwriters and selling group members. This means that if the U.S. representatives purchase shares in the open market to reduce the underwriters' short position or to stabilize the price of such shares, they may reclaim the amount of the selling concession from the underwriters and selling group members who sold those shares. The imposition of a penalty bid may also affect the price of the shares in that it discourages resales of those shares. Neither we nor any of the underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the class A common stock. In addition, neither we nor any of the underwriters makes any representation that the U.S. representatives or the lead managers will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice. These transactions may be effected on the Nasdaq National Market, in the over- the-counter market or otherwise. Other Relationships Merrill Lynch, Pierce, Fenner & Smith Incorporated has acted as our financial advisor in connection with our pending acquisition of Aurora Communications and our reorganization. In addition, Merrill Lynch has acted as sole placement agent with respect to our units consisting of 13% senior discount notes due 2010 and limited partnership units, and as sole lead arranger, book running manager and syndication agent with respect to our new credit facility. Merrill Lynch has received customary fees and commissions for these transactions. Merrill Lynch Capital Corporation, an affiliate of Merrill Lynch, owns $20.0 million aggregate principal amount of our senior discount notes and 39,806 shares of our class A common stock. Merrill Lynch Capital Corporation is also a lender under our new credit facility. BancAmerica Capital Investors SBIC I, L.P., an affiliate of Banc of America Securities LLC, will acquire 1,258,147 shares of class C common stock in connection with the Aurora Communications acquisition. Merrill Lynch Capital Corporation has agreed that it will not, with limited exceptions, sell, transfer, assign, pledge or hypothecate any shares of class A common stock for one year after the date of this prospectus. A-6 Alternative Page for International Prospectus - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Through and including , 2000 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. --------------- PROSPECTUS --------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12,425,000 Shares Nassau Broadcasting Corporation Class A Common Stock Merrill Lynch International Schroder Salomon Smith Barney Bank of America International Limited Lazard Prudential-Bache International , 2000 A-7 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and Distribution Set forth below is a table of the registration fee for the Securities and Exchange Commission, the filing fee for the National Association of Securities Dealers, Inc., the listing fee for the Nasdaq National Market and estimates of all other expenses to be incurred in connection with the issuance and distribution of the securities described in this registration statement, other than underwriting discounts and commissions: SEC registration fee........................................... $ 62,324 NASD filing fee................................................ 22,300 Nasdaq National Market listing fee............................. 87,000 Printing and engraving expenses................................ 400,000 Legal fees and expenses........................................ 600,000 Accounting fees and expenses................................... 550,000 Blue sky fees and expenses..................................... 7,500 Transfer agent and registrar fees and expenses................. 3,500 Premiums for director and officer insurance.................... 175,883 Miscellaneous expenses......................................... 11,493 ---------- Total........................................................ $1,920,000 ==========
Item 14. Indemnification of Directors and Officers Section 145 of the Delaware General Corporation Law allows for the indemnification of officers, directors and any corporate agents in terms sufficiently broad to indemnify such persons under certain circumstances for liabilities, including reimbursement for expenses incurred arising under the Securities Act. Our certificate of incorporation and our by-laws provide for indemnification of our directors, officers, employees and other agents to the extent and under the circumstances permitted by the Delaware General Corporation Law. We also expect to enter into agreements with our directors and executive officers that require, among other things, that we indemnify them against certain liabilities that may arise by reason of their status or service as directors and executive officers to the fullest extent permitted by Delaware law. We expect to purchase directors and officers liability insurance, which provides coverage against certain liabilities, including liabilities under the Securities Act. Item 15. Recent Sales of Unregistered Securities Within the past three years, we have issued and sold securities to accredited investors or qualified institutional buyers on the dates and for the consideration set forth below in transactions exempt from registration under the Securities Act of 1933, as amended. 1. From 1995 to 1997, we issued 8.0% subordinated discount notes to our existing stockholders, all of whom are accredited investors, pursuant to Section 4(2) of the Securities Act 1933. On May 4, 2000, we repaid all of these subordinated discount notes for aggregate consideration of $42.4 million. 2. On May 4, 2000, we issued and sold units consisting of senior discount notes and limited partnership units to qualified institutional buyers for gross proceeds of $60.0 million, pursuant to Section 4(2) of the Securities Act 1933. 3. Immediately prior to this offering, we effected a reorganization in which all the equity interests in Nassau Broadcasting Partners, L.P., were exchanged for shares of our common stock, pursuant to Section 4(2) of the Securities Act 1933. See the section "Reorganization" in the prospectus. II-1 Item 16. Exhibits and Financial Statement Schedules (a) Exhibits:
Exhibit No. Description ------- ----------- 1.1* Form of U.S. purchase agreement. 1.2* Form of international purchase agreement. 2.1 Purchase and Exchange Agreement dated March 24, 2000 relating to the acquisition of Aurora Communications, LLC. 2.2 Amendment No. 1 to the Purchase and Exchange Agreement dated May 4, 2000. 2.3 Asset Purchase Agreement dated February 29, 2000 among Nassau Broadcasting Partners, L.P. and Clear Channel Communications, Inc. and Clear Channel Broadcasting Licenses, Inc. 2.4 Stock Purchase Agreement dated July 1, 1996 between Nassau Broadcasting Partners, L.P. and Joseph E. Buckelew, Jean M. Kvistad, Steven V. Lane, Edward Levy and Roy G. Simmons. 2.5 Asset Purchase Agreement dated January 21, 1999 between Nassau Broadcasting Partners, L.P. and Multicultural Radio Broadcasting, Inc. 2.6 Asset Purchase Agreement dated August 30, 1996 between Nassau Broadcasting Partners, L.P. and Great Scott Broadcasting Ltd. 2.7 Amendment to Asset Purchase Agreement and Escrow Agreement dated January 17, 1997 between Nassau Broadcasting Partners, L.P. and Great Scott Broadcasting, Ltd. 2.8 Second Amendment to Asset Purchase Agreement and Escrow Agreement dated June 1, 1997 between Nassau Broadcasting Partners, L.P. and Great Scott Broadcasting, Ltd. 2.9 Third Amendment to Asset Purchase Agreement dated February 17, 1998 between Nassau Broadcasting Partners, L.P. and Great Scott Broadcasting, Ltd. 2.10 Fourth Amendment to Asset Purchase Agreement dated November 25, 1998 between Nassau Broadcasting Partners, L.P. and Great Scott Broadcasting, Ltd. 2.11 Asset Purchase Agreement dated August 7, 1998 between Nassau Broadcasting Partners, L.P. and Port Jervis Broadcasting Co., Inc. 2.12 Stock Purchase Agreement dated June 8, 1999 among Nassau Broadcasting Partners L.P., Jersey Devil Broadcasting Co., Southern Ocean Broadcasting, Inc., Great American Communications Co. and Manahawkin Communications Corp. 3.1* Certificate of incorporation of the registrant. 3.2* By-laws of the registrant. 4.1* Specimen certificate for shares of class A common stock. 4.2* Specimen certificate for shares of class B common stock. 4.3* Specimen certificate for shares of class C common stock. 4.4 Units Purchase Agreement, dated May 4, 2000 relating to $60,000,000 senior discount notes 4.5 Form of senior discount note (see Exhibit 4.4) 4.6 Credit agreement, dated May 4, 2000 among Nassau Broadcasting Partners, L.P., Merrill Lynch Capital Corporation and the other lenders. 5.1* Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to the legality of the securities being offered. 10.1 Time Brokerage Agreement dated July 1, 1996 among North Shore Broadcasting Corporation and Seashore Broadcasting Corporation and Nassau Broadcasting Partners, L.P. 10.2 Time Brokerage Agreement dated January 21, 1999 between Multicultural Radio Broadcasting, Inc. and Nassau Broadcasting Partners, L.P.
II-2
Exhibit No. Description ------- ----------- 10.3 Time Brokerage Agreement dated November 12, 1998 between Multicultural Radio Broadcasting, Inc. and Nassau Broadcasting Partners, L.P. 10.4 Local Marketing Agreement dated June 1, 1997 between Great Scott Broadcasting, Ltd. and Nassau Broadcasting Partners, L.P. 10.5 Time Brokerage Agreement dated August 1, 1998 between Port Jervis Broadcasting Co., Inc. and Nassau Broadcasting Partners, L.P. 10.6 Time Brokerage Agreement dated February 12, 1997 among Manahawkin Communications Corporation, Jersey Devil Broadcasting, Inc., Southern Ocean Broadcasting, Inc., Great American Communications Co. and Nassau Broadcasting Partners, L.P. 10.7 First Amendment to Time Brokerage Agreement dated June 15, 1999 among Manahawkin Communications Corporation, Jersey Devil Broadcasting, Inc., Southern Ocean Broadcasting, Inc., Great American Communications Co. and Nassau Broadcasting Partners, L.P. 10.8 Loan Agreement among Nassau Broadcasting Partners, L.P. and Amresco Commercial Finance, Inc. and Lenders dated August 28, 1998. 10.9* Employee Stock Purchase Plan 10.10* 2000 Stock Incentive Plan 10.11* Employment agreement with Louis F. Mercatanti, Jr., dated , 2000. 10.12* Employment agreement with Michael S. Libretti, dated , 2000. 10.13* Employment agreement with Peter D. Tonks, dated , 2000. 10.14* Registration Rights Agreement dated May 4, 2000 among Nassau Broadcasting Partners, L.P., Spectrum Equity Investors, L.P., Spectrum Equity Investors II, L.P., Grotech Partners IV, L.P., Toronto Dominion (U.S.A.), Inc, Nassau Holdings, Inc., Noel P. Rahn and Nassau Broadcasting Company 10.15 Common Stock Registration Rights dated May 4, 2000 among Nasssau Broadcasting Partners, L.P., Merrill Lynch Capital Corporation, Bank of Montreal, The Bank of Nova Scotia, OZ Master Fund, Ltd. and Caisse de Depot et Placement du Quebec. 10.16 Form of Registration Rights Agreement to be entered into among Nassau Broadcasting Corporation and some of the selling stockholders in Aurora Communications, LLC. 10.17 Agreement dated January 31, 1999 by and between Nassau Broadcasting, Inc. and Nassau Broadcasting Partners, L.P. 11.1* Statement regarding computation of per share earnings. 12.1* Statement regarding computation of ratios. 21.1** Subsidiaries of the registrant. 23.1 Consent of Grant Thornton LLP. 23.2 Consent of Ernst & Young LLP (New York). 23.3 Consent of Ernst & Young LLP (Texas). 23.4 Consent of Deloitte & Touche LLP. 23.5 Consent of Weeks Holderbaum Huber & Degraw, LLP 23.6* Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1). 24** Power of attorney.
- -------- *To be filed by amendment. **Previously filed II-3 Report of Independent Certified Public Accountants on Schedule The Partners of Nassau Broadcasting Partners, L.P. In connection with our audit of the financial statements of Nassau Broadcasting Partners, L.P. referred to in our report dated March 1, 2000, which is included in the Prospectus constituting Part I of this Registration Statement, we also audited Schedule II for each of the three years in the period ended December 31, 1999. In our opinion, this schedule presents fairly, in all material respects, the information required to be set forth therein. Grant Thornton LLP Edison, NJ March 1, 2000 Nassau Broadcasting Partners, L.P. Schedule II--Valuation and Qualifying Accounts Years Ended December 31, 1999, 1998 and 1997
Balance at Charged beginning to Costs Deductions Balance End Description of Period and Expenses (A) of Period ----------- ---------- ------------ ---------- ----------- 1999 Allowance for doubtful accounts $331,000 $904,000 $(919,000) $316,000 ======== ======== ========= ======== 1998 Allowance for doubtful accounts $135,000 $470,000 $(274,000) $331,000 ======== ======== ========= ======== 1997 Allowance for doubtful accounts $169,000 $508,000 $(542,000) $135,000 ======== ======== ========= ========
(A) Represents write-offs II-4 Item 17. Undertakings Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser. The Registrant undertakes that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of a registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Princeton, State of New Jersey, on June 28, 2000. Nassau Broadcasting Corporation /s/ Michael S. Libretti By: _________________________________ Name: Michael S. Libretti Title: Director Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities indicated on June 28, 2000.
Signature Title Date --------- ----- ---- * President, Chief Executive June 28, 2000 ______________________________________ Officer, Director and Louis F. Mercatanti, Jr. Principal Executive Officer /s/ Michael S. Libretti Executive Vice President, June 28, 2000 ______________________________________ Operations and Finance, Michael S. Libretti Chief Financial Officer, and Director * Director of Accounting & June 28, 2000 ______________________________________ Human Resources and Peter D. Tonks Principal Accounting Officer * Director June 28, 2000 ______________________________________ Brion B. Applegate * Director June 28, 2000 ______________________________________ William B. Collatos * Director June 28, 2000 ______________________________________ Stuart D. Frankel */s/ Michael S. Libretti ______________________________________ Michael S. Libretti, Attorney-in-fact
II-6 EXHIBIT INDEX
Exhibit No. Description ------- ----------- 1.1* Form of U.S. purchase agreement. 1.2* Form of international purchase agreement. 2.1 Purchase and Exchange Agreement dated March 24, 2000 relating to the acquisition of Aurora Communications, LLC. 2.2 Amendment No. 1 to the Purchase and Exchange Agreement dated May 4, 2000. 2.3 Asset Purchase Agreement dated February 29, 2000 among Nassau Broadcasting Partners, L.P. and Clear Channel Communications, Inc. and Clear Channel Broadcasting Licenses, Inc. 2.4 Stock Purchase Agreement dated July 1, 1996 between Nassau Broadcasting Partners, L.P. and Joseph E. Buckelew, Jean M. Kvistad, Steven V. Lane, Edward Levy and Roy G. Simmons. 2.5 Asset Purchase Agreement dated January 21, 1999 between Nassau Broadcasting Partners, L.P. and Multicultural Radio Broadcasting, Inc. 2.6 Asset Purchase Agreement dated August 30, 1996 between Nassau Broadcasting Partners, L.P. and Great Scott Broadcasting Ltd. 2.7 Amendment to Asset Purchase Agreement and Escrow Agreement dated January 17, 1997 between Nassau Broadcasting Partners, L.P. and Great Scott Broadcasting, Ltd. 2.8 Second Amendment to Asset Purchase Agreement and Escrow Agreement dated June 1, 1997 between Nassau Broadcasting Partners, L.P. and Great Scott Broadcasting, Ltd. 2.9 Third Amendment to Asset Purchase Agreement dated February 17, 1998 between Nassau Broadcasting Partners, L.P. and Great Scott Broadcasting, Ltd. 2.10 Fourth Amendment to Asset Purchase Agreement dated November 25, 1998 between Nassau Broadcasting Partners, L.P. and Great Scott Broadcasting, Ltd. 2.11 Asset Purchase Agreement dated August 7, 1998 between Nassau Broadcasting Partners, L.P. and Port Jervis Broadcasting Co., Inc. 2.12 Stock Purchase Agreement dated June 8, 1999 among Nassau Broadcasting Partners L.P., Jersey Devil Broadcasting Co., Southern Ocean Broadcasting, Inc., Great American Communications Co. and Manahawkin Communications Corp. 3.1* Certificate of incorporation of the registrant. 3.2* By-laws of the registrant. 4.1* Specimen certificate for shares of class A common stock. 4.2* Specimen certificate for shares of class B common stock. 4.3* Specimen certificate for shares of class C common stock. 4.4 Units Purchase Agreement, dated May 4, 2000 relating to $60,000,000 senior discount notes 4.5 Form of senior discount note (see Exhibit 4.4) 4.6 Credit agreement, dated May 4, 2000 among Nassau Broadcasting Partners, L.P., Merrill Lynch Capital Corporation and the other lenders. 5.1* Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to the legality of the securities being offered. 10.1 Time Brokerage Agreement dated July 1, 1996 among North Shore Broadcasting Corporation and Seashore Broadcasting Corporation and Nassau Broadcasting Partners, L.P. 10.2 Time Brokerage Agreement dated January 21, 1999 between Multicultural Radio Broadcasting, Inc. and Nassau Broadcasting Partners, L.P.
Exhibit No. Description ------- ----------- 10.3 Time Brokerage Agreement dated November 12, 1998 between Multicultural Radio Broadcasting, Inc. and Nassau Broadcasting Partners, L.P. 10.4 Local Marketing Agreement dated June 1, 1997 between Great Scott Broadcasting, Ltd. and Nassau Broadcasting Partners, L.P. 10.5 Time Brokerage Agreement dated August 1, 1998 between Port Jervis Broadcasting Co., Inc. and Nassau Broadcasting Partners, L.P. 10.6 Time Brokerage Agreement dated February 12, 1997 among Manahawkin Communications Corporation, Jersey Devil Broadcasting, Inc., Southern Ocean Broadcasting, Inc., Great American Communications Co. and Nassau Broadcasting Partners, L.P. 10.7 First Amendment to Time Brokerage Agreement dated June 15, 1999 among Manahawkin Communications Corporation, Jersey Devil Broadcasting, Inc., Southern Ocean Broadcasting, Inc., Great American Communications Co. and Nassau Broadcasting Partners, L.P. 10.8 Loan Agreement among Nassau Broadcasting Partners, L.P. and Amresco Commercial Finance, Inc. and Lenders dated August 28, 1998. 10.9* Employee Stock Purchase Plan 10.10* 2000 Stock Incentive Plan 10.11* Employment agreement with Louis F. Mercatanti, Jr., dated , 2000. 10.12* Employment agreement with Michael S. Libretti, dated , 2000. 10.13* Employment agreement with Peter D. Tonks, dated , 2000. 10.14* Registration Rights Agreement dated May 4, 2000 among Nassau Broadcasting Partners, L.P., Spectrum Equity Investors, L.P., Spectrum Equity Investors II, L.P., Grotech Partners IV, L.P., Toronto Dominion (U.S.A.), Inc, Nassau Holdings, Inc., Noel P. Rahn and Nassau Broadcasting Company 10.15 Common Stock Registration Rights dated May 4, 2000 among Nasssau Broadcasting Partners, L.P., Merrill Lynch Capital Corporation, Bank of Montreal, The Bank of Nova Scotia, OZ Master Fund, Ltd. and Caisse de Depot et Placement du Quebec. 10.16 Form of Registration Rights Agreement to be entered into among Nassau Broadcasting Corporation and some of the selling stockholders in Aurora Communications, LLC. 10.17 Agreement dated January 31, 1999 by and between Nassau Broadcasting, Inc. and Nassau Broadcasting Partners, L.P. 11.1* Statement regarding computation of per share earnings. 12.1* Statement regarding computation of ratios. 21.1** Subsidiaries of the registrant. 23.1 Consent of Grant Thornton LLP. 23.2 Consent of Ernst & Young LLP (New York). 23.3 Consent of Ernst & Young LLP (Texas). 23.4 Consent of Deloitte & Touche LLP. 23.5 Consent of Weeks Holderbaum Huber & Degraw, LLP 23.6* Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1). 24** Power of attorney.
- -------- *To be filed by amendment. **Previously filed EX-2.1 2 0002.txt PURCHASE & EXCHANGE AGMT DTD 3/24/2000 EXHIBIT 2.1 PURCHASE AND EXCHANGE AGREEMENT by and among NASSAU BROADCASTING PARTNERS, L.P., THE SELLERS LISTED ON THE SIGNATURE PAGES HEREOF, SELLERS' AGENT and NASSAU BROADCASTING PARTNERS, INC. Dated as of March 24, 2000 TABLE OF CONTENTS Page ---- ARTICLE I Definitions Section 1.1 Certain Definitions ....................................... 2 ------------------- Section 1.2 Cross References .......................................... 8 ---------------- Section 1.3 Singular and Plural ....................................... 10 ------------------- ARTICLE II Purchase and Exchange of Subject Interests; Closing Section 2.1 Purchase and Exchange ..................................... 10 --------------------- Section 2.2 Cash Consideration and Payment; Deposit for Purchase; ------------------------------------------------------ Contribution and Exchange ................................. 10 ------------------------- Section 2.3 Time and Place of Closing ................................. 11 ------------------------- Section 2.4 The Closing ............................................... 11 ----------- Section 2.5 Purchase and Sale of Shares of NBP ........................ 14 ---------------------------------- Section 2.6 Net Working Capital Adjustments ........................... 14 ------------------------------- ARTICLE III Representations and Warranties of Sellers as to the Companies Section 3.1 Organization; Authorization; etc .......................... 16 -------------------------------- Section 3.2 Capitalization ............................................ 17 -------------- Section 3.3 Financial Statements ...................................... 18 -------------------- Section 3.4 Licenses .................................................. 19 -------- Section 3.5 Operation of Radio Stations; FCC Reports .................. 19 ---------------------------------------- Section 3.6 Consents .................................................. 19 -------- Section 3.7 Contracts, Leases, Options and Commitments ................ 20 ------------------------------------------ Section 3.8 Assets .................................................... 20 ------ Section 3.9 Trade Rights, etc ......................................... 20 ----------------- Section 3.10 Changes since December 31, 1999 ........................... 21 ------------------------------- Section 3.11 Significant Customers ..................................... 22 --------------------- Section 3.12 Litigation, etc ........................................... 22 --------------- Section 3.13 Employees and Employee Benefit Plans ...................... 23 ------------------------------------ Section 3.14 Insurance ................................................. 24 --------- Section 3.15 Taxes ..................................................... 24 ----- ii Section 3.16 Authorized Signatories .................................... 25 ---------------------- Section 3.17 Brokers, Finders, etc ..................................... 25 --------------------- Section 3.18 Real Property ............................................. 25 ------------- Section 3.19 Holding Companies ......................................... 26 ----------------- Section 3.20 Subsidiaries .............................................. 26 ------------ Section 3.21 Environmental Matters ..................................... 26 --------------------- Section 3.22 Accounts Receivable ....................................... 26 ------------------- Section 3.23 Acquisition Agreements .................................... 26 ---------------------- Section 3.24 Affiliate Transactions .................................... 27 ---------------------- Section 3.25 No Misrepresentation ...................................... 27 -------------------- ARTICLE IIIA Representations and Warranties of Sellers as to Organization, Authorization, etc. Section 3A.1. Organization; Authorization; etc .......................... 27 -------------------------------- Section 3A.2. Investment by Continuing Sellers 28 -------------------------------- ARTICLE IV Representations and Warranties of Buyer and NBP Section 4.1 Organization; Authorization; etc .......................... 29 -------------------------------- Section 4.2 Capitalization ............................................ 30 -------------- Section 4.3 Financial Statements ...................................... 30 -------------------- Section 4.4 Licenses .................................................. 31 -------- Section 4.5 Operation of Radio Stations FCC Reports ................... 31 --------------------------------------- Section 4.6 Consents .................................................. 31 -------- Section 4.7 Assets .................................................... 32 ------ Section 4.8 Trade Rights, etc ......................................... 32 ----------------- Section 4.9 Changes Since December 31, 1999 ........................... 32 ------------------------------- Section 4.10 Litigation, etc ........................................... 33 --------------- Section 4.11 Taxes ..................................................... 33 ----- Section 4.12 Brokers, Finders, etc ..................................... 34 --------------------- Section 4.13 Real Property ............................................. 34 ------------- Section 4.14 Subsidiaries .............................................. 34 ------------ Section 4.15 Reserved .................................................. 34 -------- Section 4.16 Insurance ................................................. 34 --------- Section 4.17 Investment by Buyer ....................................... 34 ------------------- Section 4.18 Accounts Receivable ....................................... 35 ------------------- Section 4.19 Environmental Matters ..................................... 35 --------------------- Section 4.20 No Misrepresentation ...................................... 35 -------------------- iii ARTICLE V Covenants of the Parties Section 5.1 Covenants of Sellers ...................................... 36 -------------------- Section 5.2 Covenant of Buyer Regarding Aurora Communications Lease ... 40 ------------------------------------------------------- Section 5.3 Additional Covenants of Buyer ............................. 40 ----------------------------- Section 5.4 Covenants of Sellers and Buyer ............................ 42 ------------------------------ ARTICLE VI Conditions to the Closing Section 6.1 Conditions of the Parties ................................. 44 ------------------------- Section 6.2 Conditions of Buyer ....................................... 45 ------------------- Section 6.3 Conditions of Sellers ..................................... 46 --------------------- ARTICLE VII Indemnity Section 7.1 Indemnity and Indemnification Procedure ................... 47 --------------------------------------- Section 7.2 Limitation of Indemnification Liability ................... 49 --------------------------------------- Section 7.3 Definition of Damages or Damages .......................... 51 -------------------------------- Section 7.4 Survival .................................................. 51 -------- ARTICLE VIII Termination Section 8.1 Termination ............................................... 51 ----------- Section 8.2 Effect of Termination ..................................... 53 --------------------- ARTICLE IX Miscellaneous Section 9.1 Control of the Radio Stations ............................. 54 ----------------------------- Section 9.2 Benefitting Sellers ....................................... 54 ------------------- Section 9.3 Buyer Incorporation ....................................... 54 ------------------- Section 9.4 Assignment of Rights; Successors and Assigns .............. 55 -------------------------------------------- Section 9.5 Notices ................................................... 55 ------- Section 9.6 Expenses .................................................. 56 -------- Section 9.7 Appointment of Sellers' Agent ............................. 56 ----------------------------- Section 9.8 Remedies .................................................. 57 -------- Section 9.9 Publicity and Disclosures ................................. 58 ------------------------- Section 9.10 Interpretation ............................................ 58 -------------- iv Section 9.11 Counterparts .............................................. 58 ------------ Section 9.12 No Implied Waiver ......................................... 58 ----------------- Section 9.13 Entire Agreement .......................................... 58 ---------------- Section 9.14 Governing Law ............................................. 58 ------------- Section 9.15 Amendment ................................................. 58 --------- v EXHIBITS AND SCHEDULES ---------------------- Exhibit A Schedule of Subject Interests, Purchase and Exchange Consideration, etc. Exhibit B Form of Escrow Agreement Exhibit C Form of Registration Rights Agreement Exhibit D Form of Employment Termination and Non-Competition Agreement Exhibit E Form of Second Restated Securityholders' Agreement Exhibit F Form of Amendment to Restated Investment Agreement Exhibit G Fourth Restated Agreement of Limited Partnership Schedule 1.1(a) Aurora Permitted Encumbrances Schedule 1.1(b) Nassau Permitted Encumbrances Schedule 1.1(c) Radio Stations Schedule 1.1(d) Reduction Liabilities Schedule 3.1(c) Consents and Approvals Schedule 3.1(e) Certain Information about the Companies Schedule 3.2 Capitalization Schedule 3.3 Financial and Operating Statements Delivered Schedule 3.4(a) FCC Licenses Schedule 3.4(b) Pending Applications Schedule 3.6(a) Consents and Approvals of Government Authorities Schedule 3.7 Contracts, Leases, etc. Schedule 3.9 Trade Rights, etc. Schedule 3.10 Adverse Changes Schedule 3.12 Litigation, etc. Schedule 3.13 Employees and Employee Benefit Plans Schedule 3.14 Insurance Schedule 3.16 Authorized Signatories Schedule 3.18 Real Property Schedule 3.19 Holding Company Matters Schedule 3.21 Environmental Matters Schedule 3.22 Accounts Receivable Schedule 3.24 Affiliate Transactions Schedule 3A.1(c) Consents and Approvals Schedule 4.1 Consents and Approvals Schedule 4.1(d) Certain Information about the Nassau Companies Schedule 4.2 Capitalization Schedule 4.3 Financial and Operating Statements Delivered Schedule 4.4(a) FCC Licenses Schedule 4.4(b) Pending Applications Schedule 4.6 Consents and Approvals of Governmental Authorities Schedule 4.8 Trade Rights, Etc. vi Schedule 4.9 Adverse Changes Schedule 4.10 Litigation, etc. Schedule 4.13 Real Property Schedule 4.18 Accounts Receivable Schedule 4.19 Environmental Matters Schedule 5.1(a) Severance and Termination Payments Schedule 5.3(a) Conduct of Business vii EXHIBIT 2.1 PURCHASE AND EXCHANGE AGREEMENT ------------------------------- PURCHASE AND EXCHANGE AGREEMENT dated as of March 24, 2000 (this "Agreement") among Nassau Broadcasting Partners, L.P., a Delaware limited partnership ("Buyer"); the parties hereto listed as "Sellers" on the signature pages hereof (collectively, "Sellers"); BancAmerica Capital Investors SBIC I, L.P., as agent for the Sellers ("Sellers' Agent"); and Nassau Broadcasting Partners, Inc., a Delaware corporation and the managing general partner of Buyer ("NBP"). WITNESSETH: ---------- WHEREAS, the AMI Sellers (as defined in Article I below) own all of the capital stock (the "AMI Shares") of Aurora Management, Inc., a Delaware corporation ("AMI"); the AMI Shares are more fully described in Exhibit A; --------- WHEREAS, the Allied Sellers (as defined in Article I below) own all of the capital stock (the "AAA" Shares") of Allied Aurora Acquisition Corp., a Maryland corporation ("AAA," together with AMI, the "Corporate Holders"); and the AMI Sellers and the Allied Sellers are referred to herein as the "Corporation Sellers"); the AAA Shares are more fully described in Exhibit A. --------- WHEREAS, the LLC Sellers (as defined in Article I below), together with the Corporate Holders, own all of the membership and other limited liability company ownership interests of Aurora Communications, LLC, a Delaware limited liability company("Aurora Communications") (such ownership interests owned by the LLC Sellers being referred to herein as the "LLC Interests"; the LLC Interests, together with the AMI Shares and the AAA Shares, being referred to herein as the "Subject Interests"); the LLC Interests are more fully described in Exhibit A; --------- WHEREAS, Aurora Communications owns all of the membership and other limited liability company ownership interests of Aurora Holding, LLC, a Delaware LLC ("Aurora Holding"); WHEREAS, Aurora Holding owns all of the membership and other limited liability company ownership interests of each of Aurora of Bridgeport, LLC, a Delaware limited liability company ("Aurora Bridgeport"), Aurora of Bridgeport License Company, LLC, a Delaware limited liability company ("ABLC"), Aurora of Westchester, LLC, a Delaware limited liability company ("Aurora Westchester"), Aurora of Westchester License Company, LLC, a Delaware limited liability company ("AWLC"), Aurora of Danbury, LLC, a Delaware limited liability company ("Aurora Danbury"), and Aurora of Danbury License Company, LLC, a Delaware limited liability company ("ADLC," and together with Aurora Bridgeport, ABLC, Aurora Westchester, AWLC and Aurora Danbury, the "Radio Station Companies"; the Radio Station Companies, together with AMI, AAA, Aurora Communications and Aurora Holding, the "Companies"); and WHEREAS, subject to the terms and conditions set forth herein, certain of the Sellers as indicated in Exhibit A ("Exiting Sellers"), desire to sell all of their Subject Interests to Buyer for cash, and the other Sellers as indicated in Exhibit A ("Continuing Sellers"), desire to sell a portion of their Subject Interests to Buyer for cash and to contribute the remaining portion of their Subject Interests to Buyer in exchange for equity interests in Buyer, and Buyer desires to effect such purchases and such contribution and exchange (the foregoing transactions being referred to herein as the "Purchase and Exchange"). NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I Definitions Section 1.1 Certain Definitions. As used in this Agreement, the following ------------------- terms shall have the following meanings: "Acquisition Indebtedness" means (i) all borrowings under the New Nassau Credit Facility, (ii) the Nassau Mezzanine Notes and (iii) any other indebtedness for borrowed money incurred by any Nassau Company or NBP in connection with the consummation of the Purchase and Exchange, the Allentown Acquisition or the acquisition of any other Person or the equity or assets of any other Person. "Affiliate" means an "affiliate" as defined in Rule 12b-2 promulgated pursuant to the Securities Exchange Act of 1934, as amended. "Allentown Acquisition" means the transactions contemplated by the Asset Purchase Agreement, dated as of February 29, 2000, among Buyer, Clear Channel Broadcasting, Inc. and Clear Channel Broadcasting Licenses, Inc. "Allied Sellers" means Allied Capital Corporation and Allied Investment Corporation, each a Maryland corporation. "AMI Sellers" means BancAmerica Capital Investors SBIC I, L.P., a Delaware limited partnership, Osborn and Washington. "Aurora Material Adverse Effect" means any change or effect that is or would be materially adverse to the Condition of the Companies taken as a whole, excluding any changes 2 or effects caused by changes in general economic conditions or changes generally affecting the radio broadcasting industry. "Aurora Permitted Encumbrances" means: (a) Encumbrances for taxes, assessments and other levies, fees or charges imposed by any Governmental Authority which are not due and payable as of the Closing Date or, if due and payable as of the Closing Date, are accrued on the Closing Balance Sheet; (b) mechanic's and similar statutory liens for labor, materials or supplies provided in the ordinary course of business for amounts which are not delinquent and which could not reasonably be expected to have an Aurora Material Adverse Effect; (c) zoning, building and other land use laws imposed by any Governmental Authority; (d) any minor Encumbrances affecting title which do not materially interfere with the use of the Companies' assets or the operation of their businesses and which do not materially adversely affect the value of such assets or businesses; (e) Encumbrances securing Reduction Liabilities; (f) Encumbrances securing any indebtedness of the Companies under the Existing Aurora Credit Facilities; and (g) any Encumbrances described in Schedule 1.1(a). --------------- "Business Day" means any day other than a Saturday, Sunday or legal holiday in the State of Delaware. "Buyer Incorporation" means a change in the form of organization of Buyer from a limited partnership to a corporation, including the transfer of all assets and liabilities of Buyer to its corporate successor and all other transactions consummated in connection therewith. "Cash Percentage" means, with respect to any Seller, that percentage set forth for such Seller on Exhibit A. --------- "Closing" means the consummation of the Purchase and Exchange. "Closing Date" means (a) the later of(i) the date five Business Days after the date on which the grant of FCC consent to all of the FCC Applications have become Final Orders, or (ii) if such grants have become Final Orders with a condition materially adverse to Buyer, any Company or any Seller, the date five Business Days after the date the party hereto to which such condition applies elects to comply with such condition (or, if such condition applies to any Company, the date five Business Days after Buyer elects to cause such Company to comply with such condition), or (b) such other date upon which the parties may agree to close the Purchase and Exchange. "Code" means the Internal Revenue Code of 1986, as amended. "Condition," with respect to any Person, means the business, operations, condition (financial or otherwise) or results of operations of such Person or, with respect to more than one Person, of the Persons taken as a whole. 3 "Cremona" means Vincent M. Cremona. "Encumbrances" means all liens, encumbrances, mortgages, pledges, security interests, conditional sales agreements, charges, options, rights of first refusal, reservations, restrictions or other encumbrances or defects in title. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Exchanged Subject Interests" means the Subject Interests described in Exhibit A to be exchanged for Nassau Equity Interests hereunder. - --------- "Existing Aurora Credit Facilities" means (i) the Credit Agreement, dated as of August 31, 1999, among Aurora Holding, Heller Financial, Inc. and the other agents and lenders party thereto and (ii) the Subordinated Loan Agreement, dated as of September 10, 1999, among the Radio Station Companies, Aurora Communications, Aurora Holding, Allied Capital Corporation and Allied Investment Corporation. "Existing Nassau Credit Facility" means the Loan Agreement, dated as of August 28, 1998, among Buyer, AMERESCO Commercial Finance, Inc. and the other lender parties thereto. "FCC" means the Federal Communications Commission. "FCC Application," with respect to a Radio Station, means the application for an FCC order granting approval of the transfer of control of the Radio Station Company holding the FCC License of such Radio Station to Buyer as contemplated by this Agreement. "FCC License," with respect to a Radio Station, means the licenses, permits and authorizations, together with any renewals, extensions or modifications thereof as may occur between the date hereof and the Closing Date, held by the Radio Station Company which is the licensee of such Radio Station or by any of the Companies or any of the Sellers with respect to such Radio Station. "Final Order" means any action of the FCC which has not been reversed, stayed, enjoined, set aside, annulled or suspended and with respect to which no requests are pending for administrative or judicial review, reconsideration, appeal or stay, and the time for filing any such requests and the time for the FCC to set aside the action on its own motion shall have expired. "Fully Diluted Basis" means, with respect to the Nassau Equity Interests, as of a particular time, the total outstanding Nassau Equity Interests as of such time, determined by treating all outstanding options (including options under the Option Agreement (as defined in the Master Agreement)), warrants (including warrants issued in connection with the Nassau Mezzanine Notes) and other rights for the purchase or other acquisition of Nassau Equity 4 Interests (whether or not then vested or exercisable) as having been exercised and by treating all outstanding securities directly or indirectly convertible into or exchangeable for Nassau Equity Interests (whether or not then exercisable or convertible) as having been so converted or exchanged. "Generally Accepted Accounting Principles" means generally accepted accounting principles in the United States of America as set forth in pronouncements of the Financial Accounting Standards Board and the American Institute of Certified Public Accountants, as such principles are from time to time supplemented and amended. "Governmental Authority" means any foreign, federal, state or local government, political subdivision or governmental or regulatory authority, agency, board, bureau, commission, instrumentality or court or quasi-governmental authority. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Indemnified Party" means any party or parties making an Indemnity Claim against an Indemnifying Party under Article VII. "Indemnifying Party" means any party or parties against whom an Indemnity Claim is made under Article VII. "Individual Sellers" means Osborn, Washington and Cremona. "IPO" means an initial public offering of Nassau Common Stock. "LLC Sellers" means Heller Financial, Inc., a Delaware corporation, UnionBanCal Venture Corporation, a Delaware corporation, Osborn, Washington, Cremona and Aurora Management Group, LLC. "Master Agreement" means the Third Master Amendment and Agreement dated as of December 30, 1997 among Buyer, certain affiliates of Buyer and certain other Persons. "New Nassau Credit Facility" means the credit agreement that Buyer or a current or future subsidiary of Buyer intends to enter into with Merrill Lynch Capital Corporation and other syndicate lenders providing for borrowings of up to $144,000,000, as described and agreed upon between Buyer and Merrill Lynch Capital Corporation in a Commitment Letter dated February 24, 2000 and executed by each party. "Nassau Common Stock" means common stock of the corporate successor to Buyer pursuant to the Buyer Incorporation. 5 "Nassau Companies" means Buyer and all of its subsidiaries. "Nassau Equity Interests" means (i) if the Buyer Incorporation shall have occurred before or simultaneously with the Closing, the Nassau Common Stock or (ii) if the Buyer Incorporation shall not have occurred before or simultaneously with the Closing, the Nassau Partnership Interests. "Nassau Material Adverse Effect" means any change or effect that is or would be materially adverse to the Condition of the Nassau Companies taken as a whole, excluding any changes or effects caused by changes in general economic conditions or changes generally affecting the radio broadcasting industry. "Nassau Mezzanine Notes" means approximately $60,000,000 of Senior Discount Notes of Buyer and warrants to purchase equity securities of Buyer, which Buyer intends to issue to several institutions, as described in Buyer's February 2000 Offering Memorandum. "Nassau Partnership Interests" means the partnership interests of Buyer described in Exhibit A, including the capital accounts, rights to allocation of --------- income, losses, deductions, credits and distributions of cash flow and capital items of Buyer and all rights to vote or otherwise exercise any right, title or interest, in each case associated with such partnership interests. "Nassau Permitted Encumbrances" means: (a) Encumbrances for taxes, assessments and other levies, fees or charges imposed by any Governmental Authority which are not due and payable as of the Closing Date; (b) mechanics and similar statutory liens for labor, materials or supplies provided in the ordinary course of business for amounts which are not delinquent and which could not reasonably be expected to have a Nassau Material Adverse Effect; (c) zoning, building and other land use laws imposed by any Governmental Authority; (d) any minor Encumbrances affecting title which do not materially interfere with the use of the Nassau Companies' assets or operation of their businesses and which do not materially adversely affect the value of such assets or businesses; (e) Encumbrances securing any indebtedness of any of the Nassau Companies under the Existing Nassau Credit Facility, (f) Encumbrances securing any Acquisition Indebtedness and (g) any Encumbrances described in Schedule 1.1(b). --------------- "Net Working Capital" means the current assets of the Companies (including cash and cash equivalents) minus the current liabilities of the Companies, in each case determined in accordance with Generally Accepted Accounting Principles. For purposes hereof, (i) the current assets of the Companies shall exclude receivables arising under the Barter Agreements and (ii) the current liabilities of the Companies (A) shall include (1) outstanding payables not satisfied in the ordinary course and (2) all transaction expenses, bonus payments and severance payments incurred by the Companies in connection with the Purchase and Exchange (specifically excluding, however, any payments to Osborn under the Employment Termination and Non- 6 Competition Agreement and any payments contemplated by Section 5.2), and (B) shall exclude (1) the current portion of any long-term indebtedness of the Companies (which shall include the obligations of any Company as lessee under any capital lease) and (2) payables arising under Barter Agreements and (C) all other non-cash items. "Net Working Capital Adjustments" mean the adjustments to the Cash Consideration in respect of the Net Working Capital of the Companies as provided in Section 2.6. "Osborn" means Frank D. Osborn, Allison Waite Osborn, Caroline Ladner Osborn, Elizabeth Andrew Osborn, Frank William Osborn and Katherine Nelson Osborn. "Pass-through Entity" means a partnership, within the meaning of Treasury Regulation Section 301.7701-2(c)(1), or a wholly owned entity described in Treasury Regulation 301.7701-2(c)(2). "Person" means an individual, corporation, partnership, limited liability company, trust, association or other entity, including any Governmental Authority. "Purchased Subject Interests" means the Subject Interests described on Exhibit A to be sold for the Cash Consideration hereunder. - --------- "Radio Station" means any of the radio stations listed on Schedule 1.1(c) --------------- and any other radio station owned and operated by any Company. "Reduction Liabilities" means (i) all liabilities of the Companies as of the Closing Date other than current liabilities and (ii) the current portion of any long-term indebtedness of the Companies (which shall include the obligations of any Company as lessee under any capital lease), in each case, as required by Generally Accepted Accounting Principles to be accrued on the Closing Balance Sheet. The Reduction Liabilities shall include (i) all indebtedness of Aurora Holding outstanding immediately prior to the Closing under the Existing Aurora Credit Facilities, including all principal, interest, fees and other amounts then owing thereunder or payable upon the prepayment of any such indebtedness upon the Closing, and (ii) the liabilities described on Schedule 1.1(d). --------------- "Subject Interest Percentage" means, with respect to any Seller, that percentage set forth for such Seller on Exhibit A. "Treasury Regulation" means the permanent and temporary regulations of the U.S. Department of the Treasury promulgated under the Code, as such regulations may be lawfully changed from time to time (including corresponding provisions of succeeding regulations). "Washington" means Frank G. Washington. 7 Section 1.2 Cross References. The following terms defined elsewhere in this ---------------- Agreement in the Sections set forth below shall have the respective meanings therein defined: AAA Preamble AAA Financial Statements Section 3.3(b) AAA Sellers Preamble ABLC Preamble ADLC Preamble Agreement Preamble Allied Sellers Preamble AMI Preamble AMI Financial Statements Section 3.3(b) AMI Sellers Preamble AMI Shares Preamble Auditor Section 2.6(c) Aurora Bridgeport Preamble Aurora Communications Preamble Aurora Danbury Preamble Aurora Equity Interests Section 3.2 Aurora Holding Preamble Aurora Westchester Preamble AWLC Preamble Barter Agreement Section 5.1(e) Buyer Preamble Buyer Indemnified Parties Section 7.1 Buyer Repairs Section 8.1(d) Buyer/NBP Equity Interests Section 4.2 Cash Consideration Section 2.2(a) Closing Balance Sheet Section 2.6(b) Closing Net Working Capital Section 2.6(b) Closing NWC Payment Amount Section 2.6(d) Companies Preamble Continuing Sellers Preamble Corporate Holders Preamble Corporate Holders Financial Statements Section 3.3(b) Corporation Sellers Preamble Damage or Damages Section 7.3 Disputed Claim Section 7.1(f) Employee Plans Section 3.13 Employment Termination and Non- Competition Agreement Section 2.4(d) 8 Environmental Matters Section 7.1(a) ERISA Affiliate Section 3.13 Escrow Agent Section 2.2(b) Escrow Agreement Section 2.2(b) Escrow Deposit Section 2.2(b) Estimated Closing Net Working Capital Section 2.6(a) Estimated NWC Payment Amount Section 2.6(a) Exchange Interests Section 3A.2(a) Exiting Sellers Preamble Expiration Date Section 7.4 FCC Consent Section 3.6(a) GT Section 2.6(b) Indemnity Claim Section 7.1(d) Interim Financial Statements Section 3.3(a) Leased Real Property Section 3.18 LLC Interests Preamble LLC Sellers Preamble Nassau Leased Real Property Section 4.13 Nassau Owned Real Property Section 4.13 Nassau Real Property Section 4.13 NBP Preamble NBP Common Stock Section 2.5 Notice of Claim Section 7.1(d) Owned Real Property Section 3.18 Partnership Rights Agreements Section 2.4(f) Payment Event Section 2.2(b) Proprietary Information Section 5.4(c) Purchase and Exchange Preamble Radio Station Companies Preamble Real Property Section 3.18 Securities Act Section 3A.2(b) Seller Indemnified Parties Section 7.1(c) Sellers Preamble Sellers Repairs Section 8.1(c) Sellers' Agent Preamble Subject Interests Preamble Tax/Taxes Section 3.15(b) Tax Return Section 3.15(c) Third Party Claim Section 7.1(e) Transaction Agreements Section 9.7 9 Section 1.3 Singular and Plural. Terms defined in the singular shall have ------------------- comparable meanings when used in the plural, and vice versa. ARTICLE II Purchase and Exchange of Subject Interests; Closing Section 2.1 Purchase and Exchange. On the basis of the representations, --------------------- warranties, covenants and agreements and subject to the terms and conditions hereof and the satisfaction or waiver of the conditions set forth herein, Exiting Sellers agree to sell for cash and Continuing Sellers agree to sell for cash and exchange for Nassau Equity Interests, and Buyer agrees to so purchase and exchange, at the Closing, all of the Subject Interests as provided in this Article II. Section 2.2 Cash Consideration and Payment; Deposit for Purchase; ----------------------------------------------------- Contribution and Exchange - ------------------------- (a) Buyer shall purchase the Purchased Subject Interests for cash consideration (the "Cash Consideration") equal to One Hundred Fifty Million Dollars ($150,000,000), (i) minus the amount of the Reduction Liabilities and (ii) subject to the Net Working Capital Adjustments. Except as provided in Section 2.6, the Cash Consideration shall be payable to Sellers at the Closing according to their respective Cash Percentages. Buyer shall make all payments of the Cash Consideration by wire transfer of immediately available funds according to the wire instructions for Sellers set forth in Exhibit A. (b) On the date of this Agreement, Buyer shall deposit with Chase Manhattan Trust Company, National Association (the "Escrow Agent") by wire transfer of immediately available funds the amount of $7,000,000 (the "Escrow Deposit") as a deposit to secure Buyer's performance hereunder, to be held by the Escrow Agent pursuant to the terms of the Escrow Agreement being executed simultaneously herewith among Buyer, Sellers and the Escrow Agent, a copy of which Escrow Agreement is attached hereto as Exhibit B (the "Escrow Agreement"). If the Closing takes place as herein provided, then the Escrow Deposit (or, in the event that the amount of the Escrow Deposit as of the Closing Date is less than $7,000,000, such amount) shall be credited against the Cash Consideration as set forth in Section 2.2(a) and paid to Sellers according to their respective Cash Percentages, and the earnings thereon shall be paid to Buyer, all as provided in the Escrow Agreement. If the Closing does not take place because of a Payment Event (defined below) then, pursuant to the Escrow Agreement, the Escrow Deposit and the earnings thereon shall be paid to Aurora Communications as liquidated damages. Payment of such liquidated damages shall be Sellers' sole remedy against Buyer and, upon payment thereof, neither Buyer nor any Seller shall thereafter have any recourse against the other under or on account of this Agreement. In any other case if the Closing does not occur, then, pursuant to the Escrow Agreement, the Escrow Deposit and the earnings thereon shall be paid to Buyer. Delivery of the Escrow Deposit and the earnings thereon by the Escrow Agent shall be 10 made, in accordance with the procedures and other provisions set forth in the Escrow Agreement. For purposes of this Section 2.2(b), a "Payment Event" shall mean (i) the failure of the Closing to occur as a result of Buyer's failure to meet the closing conditions set forth in Sections 6.1(a), 6.1(b), 6.1(d), 6.3(d), 6.3(f) or 6.3(g), (ii) the failure of the Closing to occur as a result of the failure of any party (other than any Seller or any Company) to execute the agreements contemplated by Section 2.4(e) and the Partnership Rights Agreements, as applicable, as described in Section 6.1(c) and (iii) the termination of this Agreement by Sellers pursuant to Section 8.1(b)(ii). (c) Continuing Sellers shall contribute the Exchanged Subject Interests to Buyer in exchange for (i) if the Buyer Incorporation shall have occurred before or simultaneously with the Closing, shares of Nassau Common Stock as provided in Section 2.4(e), or (ii) if the Buyer Incorporation shall not have occurred before or simultaneously with the Closing, Nassau Partnership Interests as provided in the Partnership Rights Agreements and as provided in Section 2.4(f). Section 2.3 Time and Place of Closing. The Closing shall take place at ------------------------- 10:00 A.M. on the Closing Date at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, or at such other place as Sellers' Agent and Buyer agree. Section 2.4 The Closing. At the Closing: ----------- (a) Sellers shall convey, transfer, and assign to Buyer, and shall deliver to Buyer such instruments of conveyance, transfer, and assignment as shall be sufficient to convey, transfer, and assign to Buyer, sole and exclusive right, title and interest in and to all the Subject Interests free and clear of all Encumbrances. The Corporate Holders shall deliver to Buyer certificates representing the AMI Shares or the AAA Shares, as applicable, with stock transfer tax stamps affixed, if required, duly endorsed for transfer or with stock powers duly executed in blank attached, in good form for delivery. (b) Buyer shall deliver to Sellers the Cash Consideration as set forth in Section 2.2(a) and shall issue to Continuing Sellers, according to the percentages set forth in Exhibit A, the Nassau Equity Interests as provided in Section 2.2(c) and this Section 2.4. (c) Buyer and Continuing Sellers shall execute and deliver a Registration Rights Agreement substantially in the form of Exhibit C providing for the registration rights to Continuing Sellers with respect to Buyer described therein. (d) Buyer and Osborn shall execute and deliver, and Sellers shall cause Aurora Communications to execute and deliver, an Employment Termination and Non-Competition Agreement substantially in the form of Exhibit D (the "Employment Termination and Non-Competition Agreement"). 11 (e) If the Buyer Incorporation shall have occurred before or simultaneously with the Closing, Buyer and, to the extent applicable as provided in clause (ii) below, Continuing Sellers shall execute and deliver, as applicable, each of the following. (i) Buyer shall deliver to Continuing Sellers shares of Nassau Common Stock representing, in the aggregate, at least 21.07% of the aggregate Nassau Equity Interests determined on a Fully Diluted Basis, but without giving effect to the IPO or any other issuance and sale of Nassau Equity Interests for a consideration per Nassau Equity Interest greater than or equal to the valuation per Nassau Equity Interest agreed upon by Buyer and the Continuing Sellers in connection with the transfer of Nassau Equity Interests to the Continuing Seller hereunder, with each Continuing Seller to receive shares of Nassau Common Stock representing the percentage of the aggregate Nassau Equity Interests set forth in Exhibit A for such Continuing Seller; provided, that if -------- at any time Buyer shall issue or sell any additional Nassau Equity Interests for a consideration per share or unit of Nassau Equity Interests less than the valuation per share or unit of Nassau Equity Interests agreed upon by Buyer and the Continuing Sellers in connection with the transfer of Nassau Equity Interests to the Continuing Sellers hereunder, such equity interest of the Continuing Sellers shall be adjusted by multiplying (A) the current equity interest (as previously adjusted hereunder) by (B) a fraction, (1) the numerator of which shall be the number of outstanding Nassau Equity Interests determined on a Fully Diluted Basis immediately prior to the issuance of such additional Nassau Equity Interests plus the number of additional Nassau Equity Interests so issued and (2) the denominator of which shall be the number of outstanding Nassau Equity Interests immediately prior to the issuance of such additional Nassau Equity Interests plus the number of Nassau Equity Interests which the aggregate consideration for the total number of such additional Nassau Equity Interests so issued would purchase at the valuation per share or unit of Nassau Equity Interests agreed upon by Buyer and the Continuing Sellers in connection with the transfer of Nassau Equity Interests to the Continuing Sellers hereunder; and (ii) (A) Buyer shall deliver to each Continuing Seller one or more stock certificates representing such number of shares of Nassau Common Stock to be received by such Continuing Seller (and upon such delivery, such shares of Nassau Common Stock shall be fully paid and non-assessable); and (B) Buyer shall execute and deliver documents or instruments which terminate (1) the Master Agreement (but only after it shall have become effective for purposes of consummating the transactions contemplated by Sections 2 through 5 thereof), (2) the Amended Investment Agreement (as defined in the Master Agreement) (but only after payment of the amounts provided by Section 1 thereof) and (3) the Amended Securityholders' Agreement (as defined in the Master Agreement). (f) If the Buyer Incorporation shall not have occurred before or simultaneously with the Closing, Buyer and, in the case of the agreements referred to in clauses (i) and 12 (iv) below, Continuing Sellers shall execute and deliver the following agreements (collectively, the "Partnership Rights Agreements"): (i) Continuing Sellers shall contribute a portion of their Subject Interests, as set forth in Exhibit A hereto, in exchange for Nassau Partnership Interests representing, in the aggregate, at least 20.906% of the aggregated Nassau Partnership Interests determined on a Fully Diluted Basis, but without giving effect to the IPO or any other issuance and sale of Nassau Equity Interests for a consideration per Nassau Equity Interest greater than or equal to the valuation per Nassau Partnership Interest agreed upon by Buyer and the Continuing Sellers in connection with the transfer of Nassau Partnership Interests to the Continuing Seller hereunder, with each Continuing Seller to receive Nassau Partnership Interests representing the percentage of the aggregate Nassau Equity Interests set forth in Exhibit A for such Continuing Seller; provided, that if at any time Buyer shall issue or sell any additional -------- Nassau Equity Interests for a consideration per share or unit of Nassau Equity Interests less than the valuation per share or unit of Nassau Equity Interests agreed upon by Buyer and the Continuing Sellers in connection with the transfer of Nassau Equity Interests to the Continuing Sellers hereunder, such equity interest of the Continuing Sellers shall be adjusted by multiplying (A) the current equity interest (as previously adjusted hereunder) by (B) a fraction, (1) the numerator of which shall be the number of outstanding Nassau Equity Interests determined on a Fully Diluted Basis immediately prior to the issuance of such additional Nassau Equity Interests plus the number of additional Nassau Equity Interests so issued and (2) the denominator of which shall be the number of outstanding Nassau Equity Interests immediately prior to the issuance of such additional Nassau Equity Interests plus the number of Nassau Equity Interests which the aggregate consideration for the total number of such additional Nassau Equity Interests so issued would purchase at the valuation per share or unit of Nassau Equity Interests agreed upon by Buyer and the Continuing Sellers in connection with the transfer of Nassau Equity Interests to the Continuing Sellers hereunder; (ii) a Second Restated Securityholders' Agreement substantially, in the form of Exhibit E; (iii) an Amendment to Restated Investment Agreement substantially in the form of Exhibit F; (iv) a document or instrument terminating the Master Agreement (but only after it shall have become effective for purposes of consummating the transactions contemplated by Sections 2 through 5 thereof); and (v) a Fourth Restated Agreement of Limited Partnership of Buyer substantially in the form of Exhibit G. 13 Buyer shall cause each of the Partnership Rights Agreements to be executed and delivered at or prior to the Closing by all other parties whose execution and delivery thereof is necessary to give effect thereto upon the Closing. Section 2.5 Purchase and Sale of Shares of NBP. On the basis of the ---------------------------------- representations, warranties, covenants and agreements and subject to the satisfaction or waiver of the conditions set forth herein, but only in the event that the Buyer Incorporation shall not have occurred before or simultaneously with the Closing, Buyer agrees to sell to the Continuing Sellers and each Continuing Seller agrees to purchase, at the Closing, shares of the Common Stock, $0.01 par value per share, of NBP (the "NBP Common Stock"), representing, in the aggregate, at least 21.07% of the aggregate equity interest in NBP determined on a Fully Diluted Basis, but without giving effect to any sale of NBP Common Stock for a consideration per share of NBP Common Stock greater than or equal to the valuation per share of NBP Common Stock of agreed upon by Buyer and the Continuing Sellers in connection with the transfer of NBP Common Stock to the Continuing Seller hereunder, as set forth on Exhibit A for each Continuing Seller; provided, that if at any time NBP shall issue or sell any -------- additional equity interests for a consideration per share less than the valuation per share of NBP Common Stock agreed upon by NBP and the Continuing Sellers in connection with the transfer of NBP Common Stock to the Continuing Sellers hereunder, such equity interest of the Continuing Sellers shall be adjusted by multiplying (A) the current equity interest of the Continuing Sellers (as previously adjusted hereunder) by (B) a fraction, (1) the numerator of which shall be the number of outstanding equity interests of NBP determined on a fully diluted basis immediately prior to the issuance of such additional equity interests plus the number of additional equity interests so issued and (2) the denominator of which shall be the number of outstanding equity interests immediately prior to the issuance of such additional equity interests plus the number of equity interests which the aggregate consideration for the total number of such additional equity interests so issued would purchase at the valuation per share or unit of equity interests agreed upon by NBP and the Continuing Sellers in connection with the transfer of NBP Common Stock to the Continuing Sellers hereunder. At the Closing, (i) each Continuing Seller shall pay the aggregate purchase price to be paid by such Continuing Seller for such purchase to Buyer in immediately available funds and (ii) Buyer shall deliver to such Continuing Seller one or more stock certificates representing the shares of NBP Common Stock so purchased by such Continuing Seller against receipt of the purchase price to be paid by such Continuing Seller (and upon such delivery against such receipt, such shares of NBP Common Stock shall be fully paid and non-assessable). Section 2.6 Net Working Capital Adjustments -------------------------------- (a) At the Closing, Sellers shall cause Aurora Communications to deliver to Buyer its good faith estimate of the Net Working Capital of the Companies as of the Closing Date (which may be positive or negative) (the "Estimated Closing Net Working Capital"), together with a reasonably detailed explanation of the calculation thereof. If the Estimated Closing Net Working Capital is less than zero, then the difference between zero and the 14 Estimated Closing Net Working Capital shall be deducted from the Cash Consideration payable to Sellers at the Closing according to their respective Cash Percentages. If the Estimated Closing Net Working Capital is greater than zero, Buyer shall pay the difference between the Estimated Net Working Capital and zero (the "Estimated NWC Payment Amount") to Sellers at the Closing according to their respective Cash Percentages. (b) As soon as reasonably practicable following the Closing Date, and in any event within sixty (60) calendar days thereafter, Buyer shall (i) cause the Companies to prepare (x) a consolidated pro forma balance sheet of the Companies as of the Closing Date (the "Closing Balance Sheet") and (y) a calculation of the Net Working Capital as reflected on the Closing Balance Sheet (the "Closing Net Working Capital"), (ii) cause the Closing Balance Sheet and the calculation of Closing Net Working Capital to be audited by Grant Thornton LLP ("GT"), and (iii) deliver the Closing Balance Sheet and the calculation of Closing Net Working Capital, together with the audit letter of GT, to the Sellers' Agent. The Closing Balance Sheet shall be prepared in accordance with Generally Accepted Accounting Principles and on a basis consistent with the preparation of the historical consolidated financial statements of the Companies and shall fairly present the consolidated financial position of the Companies as of the Closing. (c) Upon delivery of the Closing Balance Sheet, Buyer shall cause the Companies to provide Sellers' Agent full access to the books and records of the Companies to the extent reasonably related to its evaluations of the Closing Balance Sheet and the calculation of the Closing Net Working Capital. If Sellers' Agent shall disagree with the calculation of the Closing Net Working Capital, it shall notify Buyer of such disagreement in writing, in reasonable detail (in light of the information then available to Sellers' Agent), within thirty (30) days after its receipt of the Closing Balance Sheet. In the event Sellers' Agent does not provide such a notice of disagreement within such thirty (30) day period, Sellers' Agent and Sellers shall be deemed to have accepted the Closing Balance Sheet and the calculation of the Closing Net Working Capital delivered by Buyer, which shall be final, binding and conclusive for all purposes hereunder. In the event any such notice of disagreement is timely provided by Sellers' Agent, Buyer and Sellers' Agent shall use their reasonable best efforts for a period of thirty (30) days (or such longer period as they may mutually agree) to resolve any disagreements with respect to the calculation of the Closing Net Working Capital. If, at the end of such period, they are unable to resolve such disagreements, then Ernst & Young LLP or such other independent accounting firm among the "Big Five" as may be mutually selected by Sellers' Agent and Buyer (the "Auditor") shall resolve any remaining disagreements. The Auditor shall advise the parties in writing as promptly as practicable, but in any event within thirty (30) days of the date on which such dispute is referred to the Auditor, based solely on written submissions forwarded by Buyer and Sellers' Agent to the Auditor within ten (10) Business Days following the Auditor's selection, whether the Closing Balance Sheet was prepared in accordance with the standards set forth in this Section 2.6 and (only with respect to the remaining disagreements submitted to the Auditor) whether and to what extent, if any, the Closing Net Working Capital determination 15 requires adjustment. The fees and expenses of the Auditor shall be paid one-half by Buyer and one-half by Sellers' Agent on behalf of Sellers. The determination of the Auditor shall be final, conclusive and binding on the parties. (d) In the event that the Closing Net Working Capital as finally determined pursuant to Section 2.6(c) is: (i) At least $50,000 greater than the Estimated Closing Net Working Capital, Buyer shall promptly pay the difference between the Closing Net Working Capital and the Estimated Closing Net Working Capital (the "Closing NWC Payment Amount") to Sellers according to their respective Cash Percentages; or (ii) At least $50,000 less than the Estimated Closing Net Working Capital, Sellers (or Sellers' Agent on Sellers' behalf) shall promptly pay the difference between the Estimated Net Working Capital and the Closing Net Working Capital to Buyer, with each Seller to pay such Seller's Cash Percentage of such difference. (e) Any amount payable by Buyer or Sellers pursuant to this Section 2.6 shall be paid by wire transfer of immediately available funds according to the wire instructions of the payee or payees set forth in Exhibit A, with each Seller to pay or be paid, as the case may be, such Seller's Cash Percentage of such amount. ARTICLE III Representations and Warranties of Sellers as to the Companies Sellers severally (and not jointly and severally), according to their respective Subject Interest Percentages, represent and warrant as to each of the following, except that (i) only the AMI Sellers severally (and not jointly and severally), according to their respective Subject Interest Percentages, make the representations and warranties relating to AMI and (ii) only the Allied Sellers severally (and not jointly and severally), according to their respective Subject Interest Percentages, make the representations and warranties relating to AAA. Section 3.1 Organization; Authorization; etc. --------------------------------- (a) Each of the Companies is a corporation or limited liability company duly organized or formed, validly existing and in good standing under the laws of its jurisdiction of incorporation, organization or formation. (b) Each Company (i) has full corporate or limited liability company power to own all of its properties and assets and to carry on its business as it is now being conducted and (ii) is duly qualified to do business and is in good standing in each jurisdiction in which the 16 conduct of its business requires it to be so qualified, except where failure to be so qualified or in good standing would not have an Aurora Material Adverse Effect. (c) Neither the execution and delivery of this Agreement nor performance by any Seller of its obligations hereunder does or will (i) conflict with any Company's certificate of incorporation or by-laws, limited liability company agreement or other constitutive documents or (ii) except as listed in Schedule 3.1(c), (x) conflict with or result in a breach of (or give rise to any right of termination or acceleration of) any term of, or require any consent under, any lease, contract or other agreement or instrument by which any Company is bound or with respect to which any Company is an obligor or guarantor or to which any property or asset of any Company is subject, (y) give rise to any Encumbrance upon any assets or property of any Company, or (z) violate any judgment or order of any Governmental Authority to which any Company is subject, except where such conflict, breach, Encumbrance or violation would not have an Aurora Material Adverse Effect. (d) Sellers have delivered to Buyer true and complete copies of the certificate of incorporation and by-laws, limited liability company agreement or other constitutive documents of each of the Companies. (e) Schedule 3.1(e) sets forth as to each Company its jurisdiction of incorporation or formation and the jurisdictions in which it is qualified to do business as a foreign corporation or foreign limited liability company. Section 3.2 Capitalization. Schedule 3.2 sets forth (i) as to each of AMI -------------- and AAA, its authorized capital stock, the number of shares of each class thereof outstanding, the record and beneficial owners of such outstanding shares of capital stock and the numbers and classes of such outstanding shares owned by such owners and (ii) as to each other Company, its authorized membership and other limited liability company ownership interests, the number of units or other ownership interests of each class thereof outstanding, the record and, with respect to Aurora Holding and each Radio Station Company, the beneficial owners of such outstanding units or other ownership interests and the numbers and classes of such outstanding units or other ownership interests owned by such owners (such outstanding shares and limited liability company ownership interests together being referred to herein as the "Aurora Equity Interests"). The Aurora Equity Interests, as set forth in Schedule 3.2, are all of the issued and outstanding shares of capital stock or membership or other limited liability company ownership interests of the respective Companies and the owners of the Aurora Equity Interests, as set forth in Schedule 3.2, are all of the record owners of the Aurora Equity Interests. All of the Aurora Equity Interests are duly authorized and validly issued and, in the case of shares of capital stock, fully paid and non-assessable, and, except for the Subject Interests, are owned by the Companies as set forth in Schedule 3.2 free and clear of any Encumbrances except restrictions imposed by federal and state securities law, the Third Amended and Restated Limited Liability Company Agreement of Aurora Communications and that certain Investor Rights Agreement, dated as of 17 May 3, 1999, among AMI and its shareholders. Except as set forth on Schedule 3.2, there are no outstanding warrants, options or other rights to acquire capital stock or membership or other limited liability company ownership interests, or securities convertible into capital stock or membership or other limited liability company ownership interests, of any of the Companies. Section 3.3 Financial Statements -------------------- (a) Sellers have previously delivered to Buyer true and complete copies of (i) the unaudited consolidated and consolidating balance sheets of the Companies (other than AMI and AAA) as of December 31, 1999 and the consolidated and consolidating statements of income and cash flows of the Companies for the period beginning January 20, 1999 through December 31, 1999 and (ii) the monthly operating statements of the Companies (other than AMI and AAA) for the month ended January 31, 2000. Except as set forth on Schedule 3.3, such financial statements and operating statements were prepared (and the financial statements to be delivered to Buyer pursuant to Section 5.1 (a)(iv) (the "Interim Financial Statements") will be prepared) in accordance with Generally Accepted Accounting Principles consistently applied and present (or, in the case of the Interim Financial Statements, will present) fairly in all material respects the financial position, results of operations and other information included therein as of the dates or for the periods specified therein, subject, in the case of such monthly statements (and the Interim Financial Statements), only to normal year-end adjustment consisting of normal recurring items which do not, in the aggregate, materially and adversely affect the financial position, results of operations and other information from that presented. (b) The AMI Sellers have previously delivered to Buyer true and complete copies of the consolidated and consolidating balance sheet of AMI as of December 31, 1999 and the consolidated and consolidating statement of income of AMI for the period April 30, 1999 through December 31, 1999 (the "AMI Financial Statements"). The AMI Financial Statements were prepared in accordance with Generally Accepted Accounting Principles consistently applied, and present fairly in all material respects the financial position, results of operations and other information included therein as of the dates or for the periods specified therein, subject only to normal year-end adjustment consisting of normal recurring items which do not, in the aggregate, materially and adversely affect the financial position, results of operations and other information from that presented. (c) Except as set forth on Schedule 3.3, all accounting ledgers and other books and records of the Companies are located at (i) in the case of AMI, the principal office of Aurora Communications in Stamford, Connecticut, (ii) in the case of AAA, 1919 Pennsylvania Avenue NW, 3rd Floor, Washington, DC 20006, and (iii) in the case of each of the other Companies, the principal office of Aurora Communications in Stamford, Connecticut. 18 Section 3.4 Licenses -------- (a) Sellers have furnished to Buyer true copies of all the FCC Licenses (which are identified on Schedule 3.4(a)), which constitute all required licenses, permits and authorizations for the day and night operation of the Radio Stations and associated auxiliary facilities of the respective Radio Station Companies indicated on such Schedule. Each Radio Station has the right to use the call letters it presently uses (as listed on Schedule 3.9), pursuant to the rules and regulations of the FCC. Each Company has complied in all material respects with the terms and conditions of the respective FCC Licenses applicable to it and with the FCC's other requirements. The FCC's most recent renewals of the FCC Licenses were not challenged by any petition to deny or by any competing application. (b) Each Company possesses all material governmental licenses, permits, approvals and other authorizations required by such Company in the conduct of its business. Except as identified in Schedule 3.4(b), no application, action or proceeding is pending for the renewal or modification of any FCC License or any of such licenses, permits, approvals or authorizations, and no application, action or proceeding is pending or, to each Seller's knowledge, threatened that may result in the denial of the application for renewal, the revocation, modification, nonrenewal or suspension of any of the FCC Licenses or any of such licenses, permits, approvals or authorizations, the issuance of a cease-and-desist order, or the imposition of any administrative or judicial sanction and, to each Seller's knowledge, there is no basis for any such denial, revocation, modification, non-renewal or suspension or any such order or sanction. Section 3.5 Operation of Radio Stations: FCC Reports ---------------------------------------- (a) Each of the Radio Stations is being operated in all material respects in accordance with the FCC Licenses, the Communications Act of 1934, as amended, the rules and regulations thereunder, and all other material legal requirements, federal, state and local, applicable to the Radio Stations. (b) To the knowledge of each Seller, all applications, reports, notices and other documents required to be filed by the Companies with the FCC or any other Governmental Authority have been filed and complied with in all material respects and are complete and correct as filed and the licensee Company of each Radio Station has timely placed in its public inspection file all documentation required by the FCC to be placed in such file by it. Section 3.6 Consents. -------- (a) Except for the consent of the FCC to the transfer of the Subject Interests and control of the Companies holding the FCC Licenses to Buyer hereunder (the "FCC Consent"), the filing of necessary reports and notifications and the receipt of necessary governmental 19 approvals under the HSR Act and as set forth in Schedule 3.6(a), no consent or approval by, or filing with, any Governmental Authority is required by any Seller or any Company in connection with the execution or delivery of this Agreement by Sellers or the consummation of the Purchase and Exchange. (b) None of the Sellers knows of any facts that would cause the FCC to deny the FCC Consent. Section 3.7 Contracts, Leases, Options and Commitments. Sellers have ------------------------------------------ delivered to Buyer true copies of the material contracts, leases, options, commitments and agreements (other than Barter Agreements) listed in Schedule 3.7. Schedule 3.7 identifies: (i) all Barter Agreements (as defined in Section 5.1(e)) to which any Radio Station Company is a party, including the dollar amount of the broadcasting time or number of spot announcements owed by the Radio Stations under the Barter Agreements; (ii) all agreements relating to any indebtedness for borrowed money of the Companies; (iii) all commitments and other agreements for the purchase of any materials, supplies or equipment, other than commitments and other agreements that were entered into in the ordinary course of business and that involve an expenditure by any Company of less than $100,000 for any one commitment or two or more related commitments; (iv) all capital leases providing for annual payments in excess of $20,000 and all leases or other rental agreements for real estate under which any Company is either lessor or lessee; (v) all employment and consulting agreements to which any Company is a party that provide for compensation in excess of $50,000 a year; (vi) all collective bargaining agreements to which any Company is a party and (vii) all contracts, leases, options, commitments and agreements (written or oral) requiring such Company to make or entitling such Company to receive annual payments in excess of $25,000 (other than sales of advertising time). Except as set forth in Schedule 3.7, each Company (and, to each Seller's knowledge, each other party to the contracts, leases, options, commitments and agreements listed in Schedule 3.7) has complied in all material respects with and is not in material default under any of the contracts, leases, options, commitments and agreements listed on Schedule 3.7. Except as set forth in Schedule 3.7, all of such contracts, leases, options, commitments and agreements are valid, binding and in full force and effect and will continue in full force and effect without change following the Purchase and Exchange without obtaining the consent of any other party thereto, except as such enforceability may be limited by applicable bankruptcy, insolvency or other laws affecting creditors' rights generally or by general principles of equity. Section 3.8 Assets. Each Company has good and marketable title to all ------ assets and properties owned by it, free and clear of all Encumbrances, other than Aurora Permitted Encumbrances. Section 3.9 Trade Rights, etc. Schedule 3.9 lists the call letters, ----------------- trademarks, tradenames and other trade rights and marks used by the Radio Station Companies in the operation of their Radio Stations. Except as listed on Schedule 3.9, no Company has licensed, 20 consented to or waived, or has any knowledge of, any other Person's use of any such call letters, trademarks, tradenames and other trade rights and marks. None of the Sellers knows of any challenge or claim with respect to the use of any such call letters, trademarks, tradenames or other trade rights or marks by the appropriate Radio Station Company. To each Seller's knowledge, the Radio Station Companies collectively possess adequate and enforceable common law rights to use (without payment) the call signs, trademarks, tradenames and other trade rights and marks used in the operation of the Radio Station Companies' business within the respective jurisdictions where such call signs, trademarks, tradenames, and other rights and marks are currently used. None of the Radio Station Companies has received any notice of conflict which asserts any rights of others with respect to any of such call signs, trademarks, tradenames or other trade rights or marks, and Sellers do not know of any basis for the assertion of any such rights. To the knowledge of each Seller, none of the Companies is infringing any patent, copyright or trademark of any third party and no claim has been made or threatened against any Company alleging any such violation. None of the Companies is a party to or bound by any license or other agreement requiring the payment by it of any royalty or similar payment other than music license agreements with ASCAP, BMI and SESAC and other agreements referred to in Schedule 3.7. Section 3.10 Changes since December 31, 1999. Except as set forth in ------------------------------- Schedule 3.10 or in any other Schedule to this Agreement, since December 31, 1999 there has not been: (a) any Aurora Material Adverse Effect, and each Radio Station Company has operated its business, including its Radio Stations, in the ordinary course of business; (b) any change in any of the licenses, permits or franchises of any Radio Station Company which has had or would have an Aurora Material Adverse Effect, or any change in the methods of accounting or accounting practice, which have had or may reasonably be expected to have an Aurora Material Adverse Effect or a material adverse effect on the licenses, permits or franchises of the Radio Station Companies as a whole; (c) any damage, destruction or other casualty loss which constitutes an Aurora Material Adverse Effect; (d) any amendment, modification or termination of any existing, or entering into any new, contract, agreement, lease, or other commitment (including any borrowing or commitment to borrow, any capital lease or any commitment to enter into a capital lease or any sale of assets or commitment to sell assets), which is material to the Condition of the Radio Station Companies as a whole, except for this Agreement and as contemplated by this Agreement; 21 (e) any disposition by any Radio Station Company of any asset which had a net book value at the time of disposition of $100,000 or more, but not more than $300,000 for all such dispositions; (f) any direct or indirect redemption, purchase or other acquisition of any capital stock, membership interest or other limited liability company ownership interest of any Company or any declaration, setting aside or payment of any dividend or other distribution on or in respect of any capital stock, membership interest or other limited liability ownership interest of any Company; (g) any transaction between any Company and any Seller or any Affiliate of any Seller (other than another Company), except for transactions relating to provision of corporate services, insurance and "overhead" by Sellers in the ordinary course consistent with past practice; (h) any change in or commitment to change the compensation payable to any of any Company's officers, directors, managers, employees or agents, or any bonus payment or similar arrangements made to or with any of such officers, directors, employees or agents other than in the ordinary course of business and consistent with past practice; (i) any capital expenditure by any Company in excess of $100,000; (j) any action by any Company to amend its articles of incorporation or bylaws, limited liability company agreement or other constitutive documents; or (k) any issuance or retirement of any equity or debt securities by any Company or any grant by any Company of any option or issuance of any warrant or securities convertible into such securities. Section 3.11 Significant Customers. No advertising customer of any Radio --------------------- Station Company represented more than 5% of such Radio Station Company's revenues in the fiscal year ended December 31, 1999. Section 3.12 Litigation, etc. Except as set forth in Schedule 3.12: --------------- (a) No action, litigation, arbitration or other proceeding (and, to the knowledge of each Seller, no investigation) is pending by or against or, to the knowledge of each Seller, threatened against any Company or Radio Station which, if adversely determined, would reasonably be expected to have an Aurora Material Adverse Effect. (b) No Company is subject or party to any judgment or order of or stipulation with any court or other Governmental Authority, or in violation of any provision of any law, 22 license, permit, approval or authorization (including applicable wage and hour, equal employment, safety and other provisions of law relating to such Company's employees), which judgment, order, stipulation or violation has had or would reasonably be expected to have an Aurora Material Adverse Effect. Section 3.13 Employees and Employee Benefit Plans. Schedule 3.13 lists all ------------------------------------ full and part-time employees of each Company and their base compensation rates as of December 31, 1999 and all pension, retirement, profit-sharing, stock option, bonus, group insurance, equity and other benefit or incentive plans, arrangements or agreements and all material employment, termination or severance arrangements or agreements sponsored by, maintained by, contributed to or required to be contributed to by any Company or by any trade or business, whether or not incorporated (an "ERISA Affiliate"), that together with any Company would be deemed a "single employer" within the meaning of section 4001(b) of ERISA, whether written or oral, for the benefit of any employees or former employee of any Company or any Company Subsidiary (collectively, the "Employee Plans"). Sellers have delivered true and complete copies of all Employee Plans to Buyer. No Company either contributes or is required to contribute to any multiemployer plan, as defined in Section 414(f) of the Code and Section 400l(a)(3) of ERISA. No Employee Plan is subject to Title IV of ERISA and no Company has at any time during the seven year period ending on the date of this Agreement maintained or contributed to, any defined benefit plan covered by Title IV of ERISA, or incurred any liability during such period under Title IV of ERISA, and the transactions contemplated by this Agreement will not subject any Company to liability under Title IV of ERISA. Each Employee Plan which is intended to be qualified under Section 401(a) of the Code is so qualified, and each related trust is exempt from taxation under Section 501(a) of the Code. There is no plan or commitment to create any Employee Plan or to modify or change any Employee Plan. Each of the Employee Plans has been operated and administered in all material respects in accordance with its terms and applicable law. There is no material liability under ERISA or otherwise with respect to any Employee Plan other than for the payment or provision of the benefits due thereunder in accordance with its terms, which has been incurred or, based upon such facts as exist on the date hereof, may reasonably be expected to be incurred. All accrued obligations of each Company with respect to the Employee Plans have been fully satisfied in their entirety. No amounts payable under the Employee Plans will fail to be deductible for federal income tax purposes by virtue of section 280G of the Code. The consummation of the transactions contemplated by this Agreement will not, either alone or in combination with another event, (i) entitle any current or former employee or officer of any Company or any ERISA Affiliate to severance pay, unemployment compensation or any other payment, except as expressly provided in this Agreement, or (ii) accelerate the time of payment or vesting, or increase the amount of compensation due any such employee or officer. No Employee Plan provides medical, surgical, hospitalization, death or similar benefits (whether or not insured) for employees or former employees of any of the Companies or any of their subsidiaries for periods extending beyond their retirement or other termination of service, other than (i) coverage mandated by applicable law, (ii) survivor benefits under any "pension plan," or (iii) benefits the full cost of which is 23 borne by the current or former employee (or his beneficiary). There are no pending, threatened or anticipated claims by or on behalf of any Employee Plan, by an employee or beneficiary covered under such Employee Plan, or otherwise involving any such Employee Plan (other than routine claims for benefits). No Seller or Company knows of any efforts to organize any employees of any Radio Station, and no strike or labor dispute involving any Radio Station has occurred or, to each Seller's knowledge, is threatened. None of the employees of any Company is represented by any labor union nor are there any collective bargaining agreements otherwise in effect with respect to such employees. Section 3.14 Insurance. Schedule 3.14 lists all insurance policies --------- maintained by or on behalf of each Company, all of which policies are in full force and effect and shall be maintained in full force and effect through the Closing. Section 3.15 Taxes. (a) Each of the Companies has timely filed all federal, ----- state, local and foreign Tax Returns that it was required to file, and such Tax Returns are correct and complete in all material respects. There are no Tax sharing or similar agreements in effect between or among any Sellers and any of the Companies. Neither AAA nor AMI is or has ever been, a member of an affiliated group (within the meaning of Section 1504(a) of the Code or any similar group defined under a similar provision of state, local or foreign law) filing a consolidated federal income tax return. Each Company has paid, or has set up an adequate reserve on its balance sheet dated as of December 31, 1999 for the payment of, all Taxes with respect to any period ending on or before December 31, 1999. For the purposes of the preceding sentence, December 31, 1999 shall be treated as the last day of a taxable period whether or not it is in fact the last day of a taxable period. Since December 31, 1999, no Company has incurred any material liability for Taxes except in the ordinary course of business. No election under Section 341(f) of the Code has been made to treat any Company as a "consenting corporation" (as defined in Section 341(f) of the Code). There are no liens for Taxes upon any property or assets of the Companies, except for liens for Taxes that are not yet due and payable. There are no matters under discussion between any Company and any taxing authority in respect of any Tax relating to any Company. Each of the Companies (except for AMI and AAA) has been a Pass-Through Entity for federal, state and local income tax purposes from the date of its formation, and no election has been made under Treasury Regulation Section 301.7701-3 by or with respect to any Company (except for AMI and AAA) for such entity to be treated as an entity other than a Pass-Through Entity. If an election or deemed election under Section 338 of the Code is made, or if any assets of any Company are sold to Buyer or any of its Affiliates after the Closing, Buyer shall be liable for and shall indemnify Sellers for all resulting income tax liabilities of Sellers and the Companies; such indemnification obligation shall survive until the expiration of the statute of limitations, plus any extensions under applicable law, with respect to the tax returns of Sellers and the Companies affected by any such election, deemed election or asset sale, plus thirty days. 24 (b) For purposes of this Agreement, the term "Tax" or "Taxes" shall mean all taxes, charges, fees, levies or other like assessments imposed by the United States, or any state, local or foreign government or subdivision or agency thereof whether computed on a separate, consolidated, unitary, combined or any other basis (including, without limitation, net or gross income, gross receipts, alternative or add-on minimum, profits, stamps, premium, environmental stamp, duty, property, value-added, excise, sales, withholding, social security, occupation, use, service, service use, license, payroll, franchise, transfer and recording taxes, fees and charges, windfall profits, severance, customs, import, export, employment or similar taxes) and such terms shall include any interest, fines, penalties and additional amounts imposed or with respect to any such taxes, charges, fees, levies or other like assessments, and (ii) any liability for the payment of any amounts of the type described in (i) as a result of being a transferee of or a successor to any person, or as a result of any express or implied obligation to indemnify any other person. (c) For purposes of this Agreement, the term "Tax Return" shall mean any ---------- return, statement, report, form (including, without limitation, any estimated, withholding, or information tax returns or reports) or other document or information required to be supplied or actually provided to a governmental authority in connection with Taxes. Section 3.16 Authorized Signatories. Schedule 3.16 lists the names of all ---------------------- authorized signatories on bank accounts and safe deposit boxes maintained by each Company, of all employees holding credit cards issued in the name of any Company and of all Persons holding powers of attorney for any Company or, with respect to his position as an officer, any officer of any Company. Section 3.17 Brokers, Finders, etc. None of the Sellers or the Companies --------------------- has employed, or is subject to any claim of, any broker, finder, consultant or intermediary in connection with the Purchase and Exchange who might be entitled to a fee or commission from Buyer upon consummation of the Purchase and Exchange. Section 3.18 Real Property. Schedule 3.18 contains a list and brief ------------- description of all real properties owned (the "Owned Real Property") or leased (the "Leased Real Property") by the Radio Station Companies, including all structures located on those real properties (the Owned Real Property and the Leased Real Property being collectively referred to herein as the "Real Property"). Except as set forth on that Schedule and except for any Aurora Permitted Encumbrance, the Radio Station Companies have good and marketable title to the Owned Real Property, free and clear of any Encumbrance. All improvements on the Owned Real Property are in accordance with all applicable laws, ordinances, regulations and orders, including, those applicable to zoning, environment and the establishment and maintenance of working conditions for labor. None of the Sellers knows of any law, ordinance, regulation, order, restriction or agreement, including any zoning law, that would restrict the present operations of the Radio Station Companies or the presently planned expansion or alteration of or addition to the 25 structures located on any of the Real Property. Except as disclosed on Schedule 3.18, the Purchase and Exchange will not adversely affect the Radio Station Companies' right to use the Real Property for the same purpose and to the same extent as they were being used by the Radio Station Companies prior to the date of this Agreement. Section 3.19 Holding Companies. Except as set forth in Schedule 3.19 or as ----------------- contemplated by or provided in this Agreement, none of the Companies (other than the Radio Station Companies) (i) owns or holds any property or assets or conducts any business (other than the ownership of the membership or other limited liability company ownership interests in any other Company as set forth in Schedule 3.2), (ii) has any liabilities (other than any indebtedness or other liability under the Existing Aurora Credit Facilities), (iii) has entered into any contractual obligation on behalf of itself or (iv) holds or is subject to any FCC License or any other license, permit, authorization or approval of any Governmental Authority. Section 3.20 Subsidiaries. None of the Companies has any direct or indirect ------------ subsidiaries, except for another Company. Other than as reflected in Schedule 3.2, none of the Companies owns, directly or indirectly, any shares or other equity interest or securities in any business organization, entity or enterprise. Section 3.21 Environmental Matters. Except as set forth in any --------------------- environmental report delivered by Sellers to Buyer prior to the date of this Agreement and except as otherwise set forth on Schedule 3.21, no hazardous or toxic substance or waste regulated under any applicable environmental, health or safety law has been generated, stored, transported or released on, in, from or to the Real Property. Except as set forth in any environmental report delivered by Sellers to Buyer prior to the date of this Agreement and except as set forth on Schedule 3.21, the Companies have complied in all material respects with all environmental, health and safety laws applicable to the Radio Stations. Section 3.22 Accounts Receivable. Except as set forth on Schedule 3.22, the ------------------- accounts receivable of the Companies have arisen in the ordinary course of business and are valid, subject, however, to the reserves for bad or questionable accounts provided for on the latest dated balance sheet included in the financial statements described in Section 3.3. Schedule 3.22 sets forth the aging of accounts receivable of the Companies as of December 31, 1999. Except as set forth on Schedule 3.22, each account receivable of the Companies described on Schedule 3.22 represents the bona fide sale and delivery of goods or services to, or as directed by, the account debtors set forth on such Schedule. None of such accounts receivable is represented by a note or chattel paper. Except as set forth on Schedule 3.22, there has been no change in policy or practice of any of the Companies relating to the collection of accounts receivable of any of the Companies or the establishment of reserves with respect thereto since December 31, 1999. Section 3.23 Acquisition Agreements. None of the Sellers or the Companies ---------------------- has made any claim (or knows of any reasonable basis for any claim) for indemnification under any 26 acquisition agreement pursuant to which any of the Sellers or their Affiliates acquired ownership of any of the Companies or any assets of any of the Companies. All of Sellers' rights to indemnification and other rights and remedies under all such acquisition agreements (if any) are assignable to Buyer hereunder (and Sellers agree to so assign, at Buyer's request at or after the Closing, any or all of such rights and remedies to Buyer). Section 3.24 Affiliate Transactions. Except for Sellers' acquisition of ---------------------- ownership of the Companies and as set forth on Schedule 3.24, there has not been any transaction between any Company and any Seller or any Affiliate of any Seller (other than another Company). Section 3.25 No Misrepresentation. None of this Agreement, Exhibit A -------------------- hereto, any Schedule or any certificate furnished or to be furnished by or on behalf of any Seller or any Company pursuant to this Agreement contains, or will contain, any untrue statement of a material fact or omits, or will omit, to state a material fact necessary to make the statements contained herein or therein not misleading. ARTICLE IIIA Representations and Warranties of Sellers as to Organization, Authorization, etc. Each Seller severally (and not jointly and severally) represents and warrants, with respect to such Seller, that: Section 3A.1. Organization: Authorization: etc. -------------------------------- (a) Such Seller (if such Seller is not an Individual Seller) is a corporation, limited partnership or limited liability company duly organized or formed, validly existing and in good standing under the laws of its jurisdiction of incorporation, organization or formation. (b) Such Seller (if such Seller is not an Individual Seller) has all requisite corporate, partnership or limited liability company power to execute and deliver this Agreement and to perform its obligations hereunder. If such Seller is an Individual Seller, such Seller has all requisite power to execute and deliver this Agreement and to perform its obligations hereunder. Such execution, delivery and performance by such Seller (if such Seller is not an Individual Seller) have been duly authorized by all necessary corporate, partnership or limited liability company action. This Agreement is the legal, valid and binding obligation of such Seller, enforceable in accordance with its terms. (c) Neither the execution and delivery of this Agreement nor performance by such Seller of its obligations hereunder does or will (i) conflict with such Seller's certificate or incorporation or by-laws, partnership agreement, limited liability company agreement or other 27 constitutive documents or (ii) except as listed in Schedule 3A.1(c), (x) conflict with or result in a breach of any term of, or require any consent under, any contract, or other agreement or instrument by which such Seller is bound, (y) give rise to any Encumbrance upon any of such Seller's Subject Interests, or (z) violate any judgment or order of any Governmental Authority to which such Seller is subject, except where such conflict, breach, Encumbrance or violation would not have an Aurora Material Adverse Effect. (d) Such Seller owns the Subject Interests described on Schedule 3.2 free and clear of any Encumbrances, except for restrictions imposed by federal and state securities laws and the Third Amended and Restated Limited Liability Company Agreement of Aurora Communications. Section 3A.2. Investment by Continuing Sellers. -------------------------------- (a) Such Continuing Seller is acquiring the Nassau Equity Interests and shares of common stock of NBP to be acquired by such Continuing Seller pursuant hereto (such Continuing Seller's "Exchange Interests") for its own account for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or selling the same; and, except as contemplated or permitted by this Agreement, such Continuing Seller has no present or contemplated agreement, undertaking, arrangement, obligation, indebtedness or commitment providing for the disposition thereof. (b) Such Continuing Seller understands that such Continuing Seller's Exchange Interests have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or any state securities law, by reason of their issuance in a transaction exempt from the registration requirements of the Securities Act and such laws, and that they must be held indefinitely unless they are subsequently registered under the Securities Act and such laws or a subsequent disposition thereof is exempt from registration. The certificates for such Continuing Seller's Exchange Interests shall bear a legend to such effect, and appropriate stop transfer instructions shall be issued. (c) Such Continuing Seller has not been formed for the specific purpose of acquiring Exchange Interests pursuant to this Agreement. Such Continuing Seller understands the term "accredited investor" as used in Regulation D promulgated under the Securities Act and represents and warrants to Buyer and NBP that such Continuing Seller is an "accredited investor" for purposes of acquiring Exchange Interests. (d) Such Continuing Seller has sufficient knowledge and experience in business and financial matters and with respect to investment in securities of privately held companies so as to enable it to analyze and evaluate the merits and risks of the investment contemplated hereby and is able to bear the economic risk of such investment. Such Continuing Seller has carefully reviewed the representations concerning Buyer and NBP contained in this 28 Agreement and has made detailed inquiry concerning Buyer and NBP, their respective businesses and personnel; Buyer has made available to such Continuing Seller any and all written information that such Continuing Seller has requested and have answered, to such Continuing Seller's satisfaction, all inquiries made by such Continuing Seller. Such Continuing Seller has adequate assets and means of providing for its needs and contingencies to sustain a complete loss of such Continuing Seller's investment in Buyer and NBP. Such Continuing Seller's overall commitment to investments that are not readily marketable is not disproportionate to such Continuing Seller's assets; and such Continuing Seller's investment in such Continuing Seller's Exchange Interests will not cause such overall commitment to become excessive. ARTICLE IV Representations and Warranties of Buyer and NBP Subject to Sections 9.2 and 9.3, Buyer and, solely for purposes of Sections 4.1, 4.2, 4.3 and 4.15, NBP represent and warrant that: Section 4.1 Organization: Authorization: etc. -------------------------------- (a) Each of the Nassau Companies and NBP is a corporation, limited partnership or limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation. Each of Buyer and NBP has all requisite corporate, partnership or limited liability company power to execute and deliver this Agreement and to perform its obligations hereunder. Such execution, delivery and performance by each of Buyer and NBP have been duly authorized by all necessary corporate, partnership or limited liability company action. This Agreement is the legal, valid and binding obligation of Buyer and NBP, enforceable in accordance with its terms. Each of the Nassau Companies and NBP (i) now has and, after consummation of the Purchase and Exchange, will have full corporate, partnership or limited liability company power to own all of its properties and assets and to carry on its business and (ii) is now and, after consummation of the Purchase and Exchange, will be duly qualified to do business and in good standing in each jurisdiction in which the conduct of its business requires it or will require it to be so qualified, except where failure to be so qualified or in good standing would not have a Nassau Material Adverse Effect. (b) Neither the execution and delivery of this Agreement nor performance by Buyer or NBP of its obligations hereunder does or will (i) conflict with Buyer's or NBP's partnership agreement, articles of incorporation or by-laws or other constitutive documents or (ii) (x) except as set forth in Schedule 4.1, conflict with or result in a breach of (or give rise to any right of termination or acceleration of) any term of, or require any consent under, any lease, contract or other agreement or instrument by which Buyer or NBP is bound or (y) violate any judgment or order of any court or other governmental authority to which Buyer or NBP is 29 subject, except where such conflict, breach or violation would not have a Nassau Material Adverse Effect. (c) Buyer has delivered to Sellers' Agent true and complete copies of the certificate of incorporate and by-laws, partnership agreement, limited liability company agreement or other constitutive documents of each of the Nassau Companies. NBP has delivered to Sellers' Agent time and complete copies of its certificate of incorporation and by-laws. (d) Schedule 4.1(d) sets forth as to each of the Nassau Companies and NBP its jurisdiction of incorporation or formation and the jurisdictions in which it is qualified to do business as a foreign limited partnership, foreign corporation or foreign limited liability company. Section 4.2 Capitalization. Schedule 4.2 sets forth (i) as to each Nassau -------------- Company, its equityholders and number, type and class of equity interests of such Nassau Company owned by such equityholders and (ii) as to NBP, its authorized capital stock, the number of shares of each class thereof outstanding, the record owners of such outstanding shares of capital stock and the numbers and classes of such outstanding shares owned by such owners (such outstanding partnership interests and capital stock being referred to herein as the "Buyer/NBP Equity Interests"). The Buyer/NBP Equity Interests, as set forth in Schedule 4.2, are all of the issued and outstanding equity interests of the Nassau Companies and all of the issued and outstanding capital stock of NBP. All of the Buyer/NBP Equity Interests are duly authorized and validly issued and, in the case of outstanding capital stock, fully paid and non-assessable. Except as set forth on Schedule 4.2, there are no options or other rights to acquire equity interests, or securities convertible into equity interests, of the Nassau Companies or NBP. Section 4.3 Financial Statements. -------------------- (a) Buyer has previously delivered to Sellers true and complete copies of the unaudited consolidated balance sheet of the Nassau Companies as of December 31, 1999 and the consolidated statements of income and cash flows of the Nassau Companies for the year then ended. NBP has previously delivered to Sellers true and complete copies of the unaudited balance sheet of NBP as of December 31, 1999 and the statements of income and cash flows of NBP for the December 31, 1999 then ended. Such financial statements were prepared in accordance with Generally Accepted Accounting Principles consistently applied (except for the omission of footnotes), and present fairly in all material respects the financial position, results of operations and other information included therein as of the date and for the period specified therein. (b) Except as set forth on Schedule 4.3, all accounting ledgers and other books and records of the Nassau Companies and NBP are located at the principal office of Buyer in Princeton, New Jersey. 30 Section 4.4 Licenses. -------- (a) Buyer has furnished to Sellers true copies of all FCC licenses (which are identified on Schedule 4.4(a)), which constitute all required licenses and permits and authorizations for the day and night operation of the radio stations and associated auxiliary facilities of such radio stations operated by the radio stations indicated on such Schedule. Each such radio station has the right to use the call letters it presently uses (as listed on Schedule 4.8), pursuant to the rules and regulations of the FCC. Each Nassau Company has complied in all material respects with the terms and conditions of the respective FCC licenses applicable to it and with the FCC's other requirements. The FCC's most recent renewals of such FCC licenses were not challenged by any petition to deny or by any competing application. (b) Each Nassau Company possesses all material governmental licenses, permits, approvals and other authorizations required by such Nassau Company in the conduct of its business. Except as identified in Schedule 4.4(b), no application, action or proceeding is pending for the renewal or modification of any of such licenses, permits, approvals or authorizations, and no application, action or proceeding is pending or, to Buyer's knowledge, threatened that may result in the denial of the application for renewal, the revocation, modification, nonrenewal or suspension of any of such licenses, permits, approvals or authorizations, the issuance of a cease-and-desist order, or the imposition of any administrative or judicial sanction and, to Buyer's knowledge, there is no basis for any such denial, revocation, modification, non- renewal or suspension or any such order or sanction. Section 4.5 Operation of Radio Stations FCC Reports. --------------------------------------- (a) Each of the radio stations owned by a Nassau Company is being operated in all material respects in accordance with the FCC licenses applicable thereto, the Communications Act of 1934, as amended, the rules and regulations thereunder, and all other material legal requirements, federal, state and local, applicable to such radio stations. (b) To Buyer's knowledge, all applications, reports, notices and other documents required to be filed by the Nassau Companies with the FCC or any other Governmental Authority have been filed and complied with in all material respects and are complete and correct as filed and the licensee company of each radio station owned by the Nassau Companies has timely placed in its public inspection file all documentation required by the FCC. Section 4.6 Consents. -------- (a) Except for the FCC Consent, the filing of necessary reports and notifications and the receipt of necessary governmental approvals under the HSR Act, any filings 31 with any Governmental Authority required to be made in connection with the Buyer Incorporation and as set forth in Schedule 4.6, no consent or approval by, or filing with, any Governmental Authority or other third party is required in connection with the execution or delivery of this Agreement by Buyer or NBP or the consummation of the Purchase and Exchange. (b) Neither Buyer nor NBP knows of any facts that would cause the FCC to deny the FCC Consent. Section 4.7 Assets. Each Nassau Company has good and marketable title to ------ the assets and properties owned by it, free and clear of all Encumbrances, other than Nassau Permitted Encumbrances. Section 4.8 Trade Rights. etc. Schedule 4.8 lists the call letters, ----------------- trademarks, tradenames and other trade rights and marks used by the Nassau Companies in the operation of their radio stations. Except as listed on Schedule 4.8, no Nassau Company has licensed, consented to or waived, and Buyer has no knowledge of, any other Person's use of any such call letters, trademarks, tradenames and other trade rights and marks. Buyer does not know of any challenge or claim with respect to the use by any of the Nassau Companies any of the call letters, trademarks, tradenames or other trade rights or marks used by the Nassau Companies in the operation of the radio stations owned by them. To Buyer's knowledge, the Nassau Companies collectively possess adequate and enforceable common law rights to use the call signs, trademarks, tradenames and other trade rights and marks so used by them within the respective jurisdictions where such call signs, trademarks, tradenames, and other rights and marks are currently used. None of the Nassau Companies has received any notice of conflict which asserts any rights of others with respect to any of such call signs, trademarks, tradenames or other trade rights or marks, and Buyer does not know of any basis for the assertion of any such rights. To Buyer's knowledge, none of the Nassau Companies is infringing any patent, copyright or trademark of any third party and no claim has been made or threatened against any Nassau Company alleging any such violation. Section 4.9 Changes Since December 31. 1999. Except as set forth in ------------------------------- Schedule 4.9 or in any other Schedule to this Agreement, since December 31, 1999 there has not been: (a) any Nassau Material Adverse Effect, and each Nassau Company has operated its business, including its radio stations, in the ordinary course of business; (b) any change in any of the licenses, permits or franchises of any Nassau Company which has had or would have a Nassau Material Adverse Effect, or any change in the methods of accounting or accounting practice, which have had or may reasonably be expected to have an Nassau Material Adverse Effect or a material adverse effect on the licenses, permits or franchises of the Nassau Companies as a whole; 32 (c) any damage, destruction or other casualty loss which constitutes a Nassau Material Adverse Effect; (d) any direct or indirect redemption, purchase or other acquisition of any partnership interest, capital stock, membership interest or other limited liability company ownership interest of any Nassau Company or any declaration setting aside or payment of any dividend or other distribution on or in respect of any partnership interest, capital stock, membership interest or other limited liability ownership interest of any Nassau Company; (e) any action by any Nassau Company to amend it articles or incorporation or by-laws, limited liability company agreement or other constitutive documents; or (f) any issuance or retirement of any equity or debt securities by any Nassau Company or any grant by any Nassau Company of any option or issuance of any warrant or securities convertible into such securities. Section 4.10 Litigation. etc. Except as set forth in Schedule 4.10: --------------- (a) No action, litigation, arbitration or other proceeding (and to the knowledge of Buyer, no investigation) is pending by or against or, to the knowledge of Buyer, threatened against any Nassau Company which, if adversely determined, would reasonably be expected to have a Nassau Material Adverse Effect. (b) No Nassau Company is subject or party to any judgment or order of or stipulation with any court or other Governmental Authority, or in violation of any provision of any law, license, permit, approval or authorization, which judgment, order, stipulation or violation has had or would reasonably be expected to have a Nassau Material Adverse Effect. Section 4.11 Taxes. Each of the Nassau Companies has timely filed all ----- federal, state, local and foreign Tax Returns that it was required to file, and such Tax Returns are correct and complete in all material respects. Each Nassau Company has paid, or has set up an adequate reserve on its balance sheet dated as of December 31, 1999 for the payment of, all federal, state, local and foreign Taxes with respect to any period ending on or before December 31, 1999. For the purposes of the preceding sentence, December 31, 1999 shall be treated as the last day of a taxable period whether or not it is in fact the last day of a taxable period. Since December 31, 1999, no Nassau Company has incurred any material liability for federal, state, local and foreign Taxes except in the ordinary course of business. There are no matters under discussion between any Nassau Company and any taxing authority in respect of any Tax assessment relating to any Nassau Company. Each of the Nassau Companies has been a Pass-Through Entity for federal, state and local income tax purposes from the date of its formation, and no election has been 33 made under Treasury Regulation Section 301.7701-3 by or with respect to any Nassau Company for such entity to be treated as an entity other than a Pass-Through Entity. Section 4.12 Brokers, Finders, etc. No Nassau Company has employed, and is --------------------- subject to any claim of, any broker, finder, consultant or intermediary in connection with the Purchase and Exchange who might be entitled to a fee or commission from any Seller upon consummation of the Purchase and Exchange. Section 4.13 Real Property. Schedule 4.13 contains a list and brief ------------- description of all real properties owned (the "Nassau Owned Real Property") or leased (the "Nassau Leased Real Property") by the Nassau Companies, including all structures located on those real properties (the Nassau Owned Real property and the Nassau Leased Real Property being collectively referred to herein as the "Nassau Real Property"). Except as set forth on that Schedule and except for any Nassau Permitted Encumbrance, the Nassau Companies have good and marketable title to the Nassau Owned Real Property, free and clear of any Encumbrances, except for any Nassau Permitted Encumbrances. All improvements on the Nassau Owned Real Property are in accordance with all applicable laws, ordinances regulations and orders including those applicable to zoning, environment and the establishment and maintenance of working conditions for labor. Buyer knows of no law, ordinance, regulation, order, restriction or agreement, including any zoning law that would restrict the present operations of the Nassau Companies. The Purchase and Exchange will not adversely affect the Nassau Companies' right to use the Nassau Real Property for the same purpose and to the same extent as they were being used by the Nassau Companies prior to the date of this Agreement. Section 4.14 Subsidiaries. None of the Nassau Companies has any direct or ------------ indirect subsidiaries, except for another Nassau Company. Other than as reflected in Schedule 4.2, none of the Nassau Companies owns, directly or indirectly, any shares or other equity interest or securities in any business organization, entity or enterprise. Section 4.15 Reserved. -------- Section 4.16 Insurance. The insurance policies maintained by Buyer and its --------- subsidiaries are adequate in scope, coverage (including for fire, casualty, liability and extended coverage) and amount for the business conducted by them, in light of policies maintained by other companies similarly situated in the industry. Section 4.17 Investment by Buyer. ------------------- (a) Buyer is acquiring the Subject Interests for its own account for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or selling the same; and Buyer has no present or contemplated 34 agreement, undertaking, arrangement, obligation, indebtedness or commitment providing for the disposition thereof. (b) Buyer understands that the Subject Interests have not been registered under the Securities Act, or any state securities law, by reason of their issuance in a transaction exempt from the registration requirements of the Securities Act and such laws, and that they must be held indefinitely unless they are subsequently registered under the Securities Act and such laws or a subsequent disposition thereof is exempt from registration. (c) Buyer has sufficient knowledge and experience in business and financial matters and with respect to investment in securities of privately held companies so as to enable it to analyze and evaluate the merits and risks of the investment contemplated hereby and is able to bear the economic risk of such investment. Buyer has carefully reviewed the representations concerning the Companies contained in this Agreement and has made detailed inquiry concerning the Companies, their respective business and personnel; Sellers have made available to Buyer any and all written information that Buyer has requested and have answered to, to Buyer's satisfaction, all inquiries made by Buyer. Section 4.18 Accounts Receivable. Except as set forth on Schedule 4.18, the ------------------- accounts receivable of the Nassau Companies have arisen in the ordinary course of business and are valid, subject, however, to the reserved for bad or questionable accounts provided for on the latest dated balance sheet included in the financial statements described in Section 4.3. Except as set forth on Schedule 4.18, each account receivable of the Nassau Companies described on Schedule 4.18 represents the bona fide sale and delivery of goods or services to, or as directed by, the account debtors set forth on such Schedule. None of such accounts receivable is represented by a note or chattel paper. Except as set forth on Schedule 4.18, there has been no change in policy or practice of any of the Nassau Companies relating to the collection of accounts receivable of any of the Companies or the establishment of reserves with respect thereto since December 31, 1999. Section 4.19 Environmental Matters. Except as set forth in any --------------------- environmental report delivered by Buyer to Sellers prior to the date of this Agreement and except as otherwise set forth on Schedule 4.19, to Buyer's knowledge no hazardous or toxic substance or waste regulated under any applicable environmental, health or safety law has been generated, stored, transported or released on, in, from or to any Nassau Real Property. Except as set forth in any environmental report delivered by Buyer to Sellers prior to the date of this Agreement and except as set forth on Schedule 4.19, to Buyer's knowledge the Nassau Companies have complied in all material respects with all environmental, health and safety laws applicable to radio stations owned by the Nassau Companies. Section 4.20 No Misrepresentation. None of this Agreement, any Exhibit, any -------------------- Schedule or any certificate furnished or to be furnished by or on behalf of Buyer or NBP 35 pursuant to this Agreement contains, or will contain, any untrue statement of a material fact or omits, or will omit, to state a material fact necessary to make the statements contained herein or therein not misleading. ARTICLE V Covenants of the Parties Section 5.1 Covenants of Sellers. Sellers, severally (and not jointly and -------------------- severally) covenant that between the date hereof and the Closing Date: (a) Conduct of Business. Except as set forth in Schedule 5.1(a): ------------------- (i) The business of each Radio Station Company and the operations of each Radio Station will be conducted only in the ordinary course of business as heretofore conducted; each Radio Station Company will use reasonable efforts to maintain the character, quality and content of its Radio Stations' programming and will maintain advertising and other promotional expenditures substantially consistent with past practices; and each Radio Station Company will use all reasonable efforts to preserve and maintain its business and properties intact, keep available the services of its employees, and preserve each Radio Station Company's relationships with its suppliers, customers, sales representatives and others having business relations with it, and generally to maintain the reputation of its Radio Stations in its broadcasting area; each Company will pay its debts and taxes when due (other than any debts or taxes the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with Generally Accepted Accounting Principles have been provided on the books of such Company) and pay or perform its other material obligations when due; and the representation and warranty in Section 3.19 shall be true and correct at all times; (ii) No Company will sell, or otherwise dispose of or encumber (other than Aurora Permitted Encumbrances), or obligate itself to sell, lease or otherwise dispose of or encumber (except for Aurora Permitted Encumbrances), any of its assets other than in the ordinary course of business, or acquire or merge or consolidate with or into any other Person, or enter into any agreements relating to any of the foregoing; provided, however, that this provision shall not prevent any disposition by a Company of any assets required to be so disposed by the FCC or any Governmental Authority; (iii) Except in accordance with such Company's normal compensation practices, no Company will, except as may be required by existing contracts listed in Schedule 3.7, increase, or obligate itself to increase, the compensation payable or to become payable by such Company to any of its employees, or incur any material additional obligations with respect to any such employees; 36 (iv) As soon as practicable after they are prepared (but in any event no later than April 15, 2000 in the case of the financial statements referred to in clause (A) below), Sellers shall furnish to Buyer (A) the consolidated and consolidating balance sheets and statements of income and cash flows of the Companies, as audited by Ernst & Young LLP, for the period beginning January 20, 1999 and ending December 31, 1999, and (B) all financial reports and statements relating to the operation of each Company that are prepared in the ordinary course of business, including monthly reports of sales and revenue, monthly operating statements, quarterly balance sheets, and any other similar documents prepared by Sellers or such Company relating to such Company (and all such monthly, quarterly or other periodic reports and statements referred to in this clause (B) shall be furnished to Buyer within thirty (30) days of the end of the relevant month, quarter or period); (v) Sellers shall promptly notify Buyer in writing of, and furnish any information Buyer may request with respect to, (i) any claim, litigation, proceeding or governmental investigation threatened or asserted by or against any of the Companies, (ii) any event or condition relating to any Seller or any of its Affiliates that would cause any of the conditions to Buyer's obligation to consummate the Purchase and Exchange not to be fulfilled and (iii) any occurrence of any kind that would have an Aurora Material Adverse Effect; (vi) None of Sellers or their Affiliates (other than a Company) will enter into any transaction with any Company, except (x) transactions relating to the provision of corporate services, insurance and "overhead" in the ordinary course consistent with past practice, (y) the Purchase and Exchange and (z) transactions required in order for the representations and warranties of Sellers contained in this Agreement to be true and correct at the Closing; (vii) No Radio Station Company will enter into any broadcast time sales agreement, or other material contract, commitment or understanding except those that are in the ordinary course of business and are consistent with the Radio Station Company's past business practices; (viii) None of Sellers or the Companies shall, without Buyer's prior written consent, by any act or omission within the reasonable control of any Seller or any Company or its agents, surrender, modify, forfeit or fail to seek renewal on regular terms of, any of the FCC Licenses held by or applicable to any Radio Station Company or its Radio Stations or cause the FCC to institute any proceedings for the cancellation or modification thereof (and Sellers represent and warrant severally (and not jointly and severally) that no such proceeding is now pending or, to Each Seller's knowledge, threatened), or fail to prosecute with due diligence any pending application to the FCC except that nothing contained herein shall prevent any Company from making any transfer of an FCC License to any other Company; 37 (ix) No Company will grant any severance or termination pay (i) to any executive officer or (ii) to any other employee except payments made in connection with the termination of employees who are not executive officers in amounts consistent with such Company's policies and past practices or pursuant to written agreements outstanding and identified in Schedule 3.7; (x) No Company will commence any litigation other than (x) for the routine collection of bills or (y) in such cases where such Company in good faith determines that failure to commence suit would result in the material impairment of such Company's business, provided that such Company notifies Buyer prior to the filing of such a suit; (xi) No Company will declare or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any of its equity securities, or split, combine or reclassify any of its equity securities; provided, that any Radio Station Company may pay such dividends or make such distributions to another Radio Station Company; (xii) No Company will repurchase or otherwise acquire, directly or indirectly, any of its equity securities except from non-executive officers or other similar personnel in accordance with agreements existing as of the date hereof and identified in Schedule 3.7 that require the repurchase of securities in connection with any termination of service to such Company; (xiii) No Company will issue, deliver or sell or authorize or propose the issuance, delivery or sale of, any securities of any class, type or kind, or subscriptions, rights, warrants or options to acquire, or enter into other agreements or commitments of any character obligating it to issue any such securities; (xiv) No Company will cause, permit or propose any amendments to its articles of incorporation or by-laws, limited liability company agreement or other constitutive documents; (xv) No Company will incur any indebtedness for borrowed money (other than ordinary course trade payables or pursuant to existing credit facilities in the ordinary course of business), enter into any capital lease or guarantee any indebtedness of others; and (xvi) If any of the contracts on Schedule 3.7 are subject to expiration or termination before the Closing, the Company which is a party to such contract shall use reasonable efforts to extend such contracts on reasonable terms in accordance with its past practice unless such Company shall determine that such expiration or termination is in the best interest (financial and otherwise) of such Company. 38 (b) Access to Companies. ------------------- (i) Sellers shall permit, and shall cause the Companies to permit, upon reasonable notice and during regular business hours, any individuals designated by Buyer to observe any aspect of the business of any Company or the operations of any Radio Station as shall be reasonably necessary for Buyer to assume management duties after the Closing. Nothing herein shall limit any Seller's or any Company's right and obligation to manage, control, direct and supervise the employees and operations of such Company or any Radio Station. (ii) Sellers shall give, and shall cause the Companies to give, to Buyer and to Buyer's attorneys, accountants, engineers and other agents or representatives, and to Buyer's lenders, underwriters, financial advisors or potential lenders and their attorneys, agents and representatives, reasonable access, during normal business hours, to all of any Company's properties, books, contracts, commitments and records, and will furnish Buyer and such lenders or potential lenders during such period with copies thereof and any other information relating to any such Company as Buyer or such underwriters, financial advisors or lenders or potential lenders may reasonably request. Sellers and Buyer and such banks, firms or lending institutions shall cooperate to minimize the disruption to operations that may be caused by such access. (c) Cooperation with respect to Financing. Sellers shall cooperate, ------------------------------------- and shall cause the Companies to cooperate, with Buyer, Buyer's lenders and potential lenders and their attorneys, agents and representatives in Buyer's obtaining the financing required to consummate the Purchase and Exchange. (d) No Solicitation. From the date hereof to the Closing or the --------------- termination of this Agreement, none of the Sellers or any Company shall, directly or indirectly, through any of their officers, directors, employees, representatives or agents, encourage, solicit or initiate discussions or negotiations with, or knowingly provide any information to, any Person or group (other than Buyer, its lenders and potential lenders and their respective agents and representatives) concerning any merger, sale of substantial assets, sale of shares of equity securities or similar transaction involving any Company. (e) Barter Agreements. From the date hereof to the Closing Date, ----------------- Sellers shall not permit any Radio Station Company to enter into a barter, trade, or similar agreement (a "Barter Agreement") for the sale of more than $50,000 of air time without Buyer's written consent (which consent shall not be unreasonably withheld or delayed). (f) Reduction Liabilities. During the period from the delivery of --------------------- the certificate of the Chief Financial Officer of Aurora Communications required to be delivered pursuant to Section 6.2(c) to the Closing, none of the Reduction Liabilities shall be increased 39 (whether through the incurrence of any additional indebtedness or otherwise) from the amounts thereof stated in such certificate. Section 5.2 Covenant of Buyer Regarding Aurora Communications Lease. Buyer ------------------------------------------------------- agrees that, for a period of one year from and after the Closing, it will (i) cause Aurora Communications to continue the Lease Agreement dated July 1999 between Three Stamford Landing Associates LLC and Aurora Communications and (ii) permit Osborn to continue to occupy the lease premises (with telephone and utility services to be provided to the lease premises as they are currently provided) at no cost to Osborn. During such one year period, Buyer will make, or cause Aurora Communications to make, monthly payments of $13,000 to or as directed by Osborn solely for the purposes of paying rent and occupancy costs under such lease and other administrative expenses. Unless Osborn (or his designee) shall have assumed (subject to landlord approval) Aurora Communication's obligations under such lease at the end of such one year period and shall have given Buyer notice of his intent to do so at least 90 days prior to the end of such period, Osborn shall vacate the lease premises at the end of such period. At the Closing, Buyer shall cause the Companies to convey to Osborn or to any Person designated by Osborn, without charge, all of the office furniture and equipment located on the leased premises (other than any such furniture and equipment constituting fixtures or owned by any Person other than Osborn or any Company). Section 5.3 Additional Covenants of Buyer. Subject to Section 9.2, Buyer ----------------------------- covenants that, between the date hereof and the Closing Date: (a) Conduct of Business. Except (other than with respect to clauses ------------------- (iii) and (iv) below) as contemplated by the Buyer Incorporation or the IPO or as set forth in Schedule 5.3(a): (i) The business of each Nassau Company and the operations of each radio station will be conducted only in the ordinary course of business as heretofore conducted; each Nassau Company will use reasonable efforts to maintain the character, quality and content of its radio station's programming and will maintain advertising and other promotional expenditures substantially consistent with past practices; and each Nassau Company will use all reasonable efforts to preserve and maintain its business and properties intact, keep available the services of its employees, and preserve each Nassau Company's relations with its suppliers, customers, sales representatives and others having business relations with it, and generally to maintain the reputation of its radio stations in its broadcasting area; each Nassau Company will pay its debts and taxes when due (other than any debts or taxes the amount or validity of which are currently being contested in good faith and appropriate proceedings and with respect to which reserved in conformity with Generally Accepted Accounting Principles have been provided on the books of such Nassau Company), and pay or perform its other material obligations when due; 40 (ii) No Nassau Company will sell, or otherwise dispose of or encumber (other than Nassau Permitted Encumbrances), or obligate itself to sell, lease or otherwise dispose of or encumber (except for Nassau Permitted Encumbrances), any of its assets other than in the ordinary course of business, or acquire or merge or consolidate with or into any other Person, or enter into any agreements relating to any of the foregoing; provided, however, that this provision shall not prevent any disposition by any Nassau Company of any assets required to be so disposed by the FCC or any Governmental Authority; (iii) As soon as practicable after they are prepared (but in any event no later than March 31, 2000 in the case of the financial statement referred to in clause (A) below), Buyer shall furnish to Sellers' Agent (A) the consolidated balance sheets and statements of income and cash flows of the Nassau Companies, as audited by Grant Thornton LLP, for the period beginning January 1, 1999 and ending December 31, 1999, and (B) all consolidated financial reports and statements relating to the operation of the Nassau Companies that are prepared in the ordinary course of business, including monthly reports of sale and revenue, monthly operating systems quarterly balance sheets, and any other similar documents prepared by the Nassau Companies relating to the Nassau Companies (and all such monthly, quarterly or other periodic reports and statements referred to in this clause (B) shall be furnished to Sellers' Agent within thirty (30) days of the end of the relevant month, quarter or period); (iv) Buyer shall promptly notify Sellers' Agent in writing of, and furnish any information Sellers' Agent may request with respect to, (i) any claim, litigation, proceeding or governmental investigation threatened or asserted by or against any of the Nassau Companies, (ii) any event or condition relating to Buyer or any of its Affiliates that would cause any of the conditions to Sellers' obligation to consummate the Purchase and Exchange not to be fulfilled and (iii) any occurrence of any kind that would have a Nassau Material Adverse Effect; (v) No Nassau Company shall, without Sellers' Agent's prior written consent, by any act or omission within the reasonable control of such Nassau Company or its agents, surrender, forfeit or fail to seek renewal on regular terms of, any FCC license held by or applicable to it or cause the FCC to institute any proceedings for the cancellation or modification thereof (no such proceeding being now pending or, to Buyer's knowledge, threatened), or fail to prosecute with due diligence any pending application to the FCC, except that nothing contained herein shall prevent any Nassau Company from making any transfer of an FCC license to any company wholly owned (directly or indirectly) by Buyer; (vi) No Nassau Company will commence any litigation other than (x) for the routine collection of bills or (y) in such cases where such Nassau Company in good faith determines that failure to commence suit would result in the material impairment of such Nassau Company's business, provided that such Nassau Company notifies Sellers' Agent prior to the filing of such a suit; 41 (vii) Buyer will not declare or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any of its equity securities, or split, combine or reclassify any of its equity securities; provided, that any Nassau Company may pay such dividends or make such distributions to another Nassau Company; (viii) No Nassau Company (other than Buyer pursuant to the Master Agreement, the Amended and Restated Option Agreement referred to in the Master Agreement and the July 31, 1995 Letter referred to in the Master Agreement) will repurchase or otherwise acquire, directly or indirectly, any of its equity securities, except from non-executive officers or other similar personnel in accordance with agreements existing as of the date hereof and delivered to Sellers prior to the date hereof that require the repurchase of securities in connection with any termination of service to such Nassau Company, and except that up to $8 million of equity securities of Buyer may be repurchased or otherwise acquired by the Nassau Companies; (ix) No Nassau Company (other than Buyer pursuant to the Master Agreement, the Amended and Restated Option Agreement referred to in the Master Agreement and the July 31, 1995 Letter referred to in the Master Agreement) will issue, deliver or sell or authorize or propose the issuance, delivery or sale of, any securities of any class, type or kind, or subscriptions, rights, warrants or options to acquire, or enter into other agreements or commitments of any character obligating it to issue any such securities, except pursuant to or in connection with (1) the Existing Nassau Credit Facility, (2) any Acquisition Indebtedness or (3) an IPO; and (x) No Nassau Company will cause, permit or propose any amendments to its partnership agreements, articles or incorporation or by-laws, limited liability company agreement or other constitutive documents, other than pursuant to the Master Agreement or the Buyer Incorporation and other than any amendments that would not adversely affect the Nassau Equity Interests to be received by Continuing Sellers at the Closing. (b) Access to Nassau Companies. Buyer shall give, and shall cause -------------------------- the Nassau Companies to give, to Sellers' Agent and to its attorneys, accountants, engineers and other agents or representatives, reasonable access, during normal business hours, to all of any Nassau Company's properties, books contracts, commitments and records, and will furnish Sellers' Agent during such period with copies thereof and any other information relating to any such Nassau Company as Sellers' Agent may reasonably request. Sellers' Agent and Buyer shall cooperate to minimize the disruption to operations that may be caused by such access. Section 5.4 Covenants of Sellers and Buyer. Sellers, jointly and severally, ------------------------------ and Buyer covenant that: (a) FCC Application. Sellers and Buyer shall cooperate in the --------------- preparation and filing, within ten days after the date hereof, of FCC Applications for each of the Radio 42 Stations. The parties shall cooperate in the diligent submission of any additional information requested by the FCC with respect to such FCC Applications, and shall take all reasonable steps that are necessary and proper to the expeditious prosecution of such FCC Applications to a favorable conclusion. (b) HSR Act. Sellers and Buyer shall cooperate in the preparation ------- and filing, within ten days after the date hereof, of any reports or notifications that may be required to be filed under the HSR Act in connection with the Purchase and Exchange with each of the Department of Justice and the Federal Trade Commission, and Sellers and Buyer promptly shall comply with all requests for further documents and information made by the Department of Justice or the Federal Trade Commission, and shall furnish to the other all such information in its possession as may be necessary for the completion of the reports or notifications to be filed by the other. (c) Confidentiality. Except as required by law, or unless otherwise --------------- agreed to in writing by the other party, Buyer and each Seller agrees that for a period of five years following the date hereof, it (i) will keep all Proprietary Information (as defined below) of the disclosing party confidential (other than disclosures to the receiving party's equity holders, board of directors, senior management, personnel and legal and accounting and financial advisors on a "need to know" basis) and (ii) will not use Proprietary Information of the disclosing party for any purpose other than for purposes of evaluating or effecting the Purchase and Exchange. For purposes of this Section 5.4(c), "Proprietary Information" means information about the disclosing party regardless of the form in which it is communicated that contains or otherwise reflects information about the disclosing party, other than for information that (i) becomes generally available to the public other than as a result of disclosure by the receiving party or any of its representatives, (ii) was available to the receiving party on a non-confidential basis prior to the disclosure of such information to the receiving party, provided that the source of such information was not known to the receiving party to be bound by a confidentiality agreement with, or other contractual, legal or fiduciary obligation of confidentiality to, the disclosing party with respect to such information, or (iii) becomes available on a non-confidential basis from a source other than the disclosing party or its representatives, provided that the source of such information was not known by the receiving party to be bound by a confidentiality agreement with, or other contractual, legal or fiduciary obligation of confidentiality to, the disclosing party with respect to such information. If this Agreement is terminated as provided in Article VIII, each receiving party, at its own expense shall return to the disclosing party all books, records and other documents and papers obtained from the disclosing party, and all copies, that contain or consist of Proprietary Information (d) Reasonable Commercial Efforts. Except as otherwise provided ----------------------------- herein, the parties hereto agree to cooperate and use their reasonable commercial efforts to consummate the Purchase and Exchange. 43 (e) Further Assurances. Each party shall cooperate and take such actions, ------------------ and execute such other documents, at the Closing or subsequently, as may be reasonably requested by another party in order to more effectively transfer the Subject Interests from Sellers to Buyer and to issue the Nassau Equity Interests to Continuing Sellers and to otherwise carry out the other provisions and purposes of this Agreement. ARTICLE VI Conditions to the Closing The obligations of the parties identified in the respective sections below to consummate the Purchase and Exchange are subject to the satisfaction or waiver in writing, at or prior to the Closing, of the conditions set forth in such respective sections: Section 6.1 Conditions of the Parties. The obligations of Sellers, on the ------------------------- one hand, and Buyer and NBP, on the other hand (considering Sellers to be one party and Buyer and NBP to be one party for this Section 6.1): (a) The other party's representations and warranties in this Agreement shall be true and correct in all material respects (or, in the case of any representation or warranty that expressly contains a materiality or similar qualification, in all respects) at and as of the Closing as though made at and as of such time, except for changes contemplated by the this Agreement, and except to the extent that a different time is specifically stated in any such representation and warranty; and the other party's covenants and agreements in this Agreement shall have been performed or complied with in all material respects at or prior to the Closing; (b) Buyer and NBP, on the one hand, or each Seller, on the other hand, shall have delivered a certificate executed by (i) if such party is a corporation, such party's President and Secretary, (ii) if such party is a partnership or limited liability company, a general partner or authorized member or manager of such party or (iii) if such party is an individual, such individual, in each case, dated the Closing Date, certifying the fulfillment of the condition in Section 6.1(a) and, in the case of each Seller, the conditions in Section 6.2(d) and (e); (c) Each party (other than Buyer, NBP, Sellers, Sellers' Agent or Aurora Communications) whose execution and delivery is necessary for effectiveness thereof shall have executed and delivered the agreements contemplated by Section 2.4(e) and the Partnership Rights Agreements, as applicable, and the Employment Termination and Non-Competition Agreement as contemplated by Section 2.4; (d) The other party shall have delivered an opinion of counsel, dated the Closing Date, as agreed to by each party hereto; 44 (e) Final Orders granting the FCC's consent and approval to the transfer of control of the FCC Licenses for all of the Radio Stations to Buyer as contemplated by the Agreement shall have been obtained as contemplated by the definition of "Closing Date" in Section 1.1; and (f) All applicable waiting periods shall have expired and all necessary approvals shall have been obtained under the HSR Act with respect to the Purchase and Exchange. Section 6.2 Conditions of Buyer. The obligations of Buyer and NBP: ------------------- (a) The consents approvals and other actions of any Governmental Authority listed in Schedules 3.1(c), 3.4(b), 3.6(a), 3.7 and 3A.1(c) shall have been obtained, in form and substance reasonably satisfactory to Buyer and its counsel. (b) No action or proceeding shall have been instituted or threatened by any governmental authority which seeks to restrain or prohibit the Purchase and Exchange, or which seeks to subject Buyer to any liability, penalty or restriction in connection with this Agreement or the Purchase and Exchange; and no injunction or order prohibiting the Purchase and Exchange shall be in effect. (c) Not later than three days prior to the Closing, Sellers shall have delivered to Buyer, each in form satisfactory to Buyer, (i) a certificate signed by the Chief Financial Officer of Aurora Communications, setting forth, in reasonable detail, the Reduction Liabilities, as of the Closing Date, and the individual and aggregate amounts thereof and (ii) letters from the Companies' lenders (A) setting forth the Reduction Liabilities owed or payable to such lenders in reasonable detail (including as to principal, interest, prepayment fees and all other amounts then owing or that would be payable upon the payment of all principal on the Closing Date) and (B) identifying all Encumbrances held by such lenders and all related UCC and other lien filings then on file. All such Reduction Liabilities shall be prepayable in accordance with their terms upon or in connection with the Closing. (d) All intercompany accounts between any of the Companies and any of the Sellers shall have been paid in full. (e) None of the FCC Licenses shall have been revoked or suspended; and there shall not have been any adverse change in the terms and conditions of any FCC License with respect to any Radio Station, except to the extent that any such revocation, suspension or change has not resulted in and would not result in an Aurora Material Adverse Effect; and no proceeding for any such revocation, suspension or change shall be in effect or shall have been threatened. 45 (f) All proceedings taken in accordance with the Purchase and Exchange and all documents incident to such proceedings shall be reasonably satisfactory to counsel to Buyer. (g) Sellers shall have provided to Buyer a report of the appropriate filing officers in the jurisdictions in which the Radio Stations or other assets of the Companies are located indicating the absence of filings of financing statements and other liens of record (other than those reflecting the liens and security interests identified in Schedule 3.8) with their respective offices under the Uniform Commercial Code with respect to any of the Radio Stations or other assets of the Companies and dated not more than five (5) Business Days prior to the Closing Date. (h) Buyer shall have received the written resignation of (i) all officers and members of the Boards of Directors of the Corporate Holders and (ii) all managers, officers, directors or similar representatives of each other Company (in each case effective at or prior to the Closing). Section 6.3 Conditions of Sellers. The obligations of Sellers (or, in the --------------------- case of Section 6.3(c), solely the Continuing Sellers): (a) No action or proceeding shall have been instituted or threatened by any governmental authority which seeks to restrain or prohibit the Purchase and Exchange, or which seeks to subject any Seller to any liability, penalty or restriction in connection with this Agreement or the Purchase and Exchange; and no injunction or order prohibiting the Purchase and Exchange shall be in effect. (b) The consents, approvals and other actions of any Governmental Authority listed in Schedules 4.1, 4.4(a) and 4.4(b) shall have been obtained, in form and substance reasonably satisfactory to Sellers and their counsel. (c) None of the Nassau Companies' FCC licenses shall have been revoked or suspended, and there shall not have been any adverse change in the terms and conditions of any such FCC license with respect to any radio station owned by the Nassau Companies, except to the extent that any such revocation, suspension or change has not resulted in and would not result in a Nassau Material Adverse Effect; and no proceeding for any such revocation, suspension or change shall be in effect or shall have been threatened. (d) All proceedings taken in accordance with the Purchase and Exchange and all documents incident to such proceedings shall be reasonably satisfactory to counsel to Sellers. (e) The FCC shall have granted its consent to the transactions contemplated by the Master Agreement and such grant shall have become a Final Order. 46 (f) In the event that the Buyer Incorporation has occurred prior to or will occur simultaneously with the Closing, the IPO shall have occurred or shall occur simultaneously with the Closing. (g) Buyer shall have executed and delivered to BACI, upon the request of BACI, all forms and information required by the rules and regulations of the United States Small Business Administration. ARTICLE VII Indemnity Section 7.1 Indemnity and Indemnification Procedure. --------------------------------------- (a) Subject to the limitations set forth in Section 7.2 and to Sections 7.4 and 9.2, from and after the Closing Date, Sellers, severally (and not jointly and severally), according to their respective Subject Interests Percentages, shall indemnify and hold harmless Buyer and NBP and their respective officers, directors, partners, employees, Affiliates, agents, representatives, successors and assigns (collectively, the "Buyer Indemnified Parties") from and against and in respect of any and all Damages resulting from any breach of any representation, warranty, covenant or agreement of Sellers in this Agreement, except for the representations, warranties, covenants and agreements described in Section 7.1(b). (b) Subject to the limitations set forth in Section 7.2 and to Sections 7.4 and 9.2, from and after the Closing each Seller shall severally (and not jointly and severally) indemnify and hold harmless the Buyer Indemnified Parties from and against any and all Damages resulting from (1) the breach of any representation or warranty made by such Seller in Article IIIA, or (2) any breach of any covenant or agreement to be performed by such Seller under Sections 2.4(a), 2.4(c), 2.5, 2.6(d)(ii), 5.1(d), 5.4(c), 5.4(d) or 5.4(e). (c) Subject to Sections 7.1(h), 7.4, 9.2 and 9.3 and to the limitations set forth in Section 7.2, from and after the Closing Date, Buyer shall indemnify Sellers and their respective officers, directors, partners, members, employees, Affiliates, agents, representatives, successors and assigns (collectively, the "Seller Indemnified Parties") from and against and in respect of any and all Damages resulting from any breach of any representation, warranty, covenant or agreement of Buyer or NBP in this Agreement. (d) Subject to Section 7.1(h), if any matter shall arise which, in the opinion of an Indemnified Party, constitutes or may give rise to Damages subject to indemnification by the Indemnifying Party as provided in this Article VII (an "Indemnity Claim"), such Indemnified Party shall give prompt written notice (a "Notice of Claim") of such Indemnity Claim to the Indemnifying Party setting forth the relevant facts and circumstances of such Indemnity Claim in 47 reasonable detail and the amount of indemnity (to the extent the Indemnified Party can reasonably determine such amount) sought from the Indemnifying Party with respect thereto. A failure to give such notice or delay in giving such notice shall not affect the Indemnified Party's right to indemnification or the Indemnifying Party's obligation to indemnify as set forth in this Agreement, except to the extent the Indemnifying Party is actually prejudiced by such failure or delay. (e) If any Indemnity Claim is based on any demand, suit, claim or assertion of liability by one or more third parties against any of the Buyer Indemnified Parties that could give rise to an indemnification obligation under Section 7.1(a) against Sellers (a "Third Party Claim"), the obligations and liabilities of the parties with respect to any Third Party Claim shall be subject to the following additional terms and conditions: (i) Sellers' Agent (on behalf of Sellers) shall have the right to undertake, by counsel or other representatives of its own choosing, the defense or opposition to such Third Party Claim by written notice to Buyer. (ii) In the event that Sellers' Agent shall elect not to undertake such defense or opposition, or, within twenty (20) days after written notice to Sellers' Agent of any such Third Party Claim from Buyer, Sellers' Agent shall fail to undertake to defend or oppose, Buyer (upon further written notice to Sellers' Agent) shall undertake the defense, opposition, compromise or settlement of such Third Party Claim, by counsel of its own choosing on behalf of and for the account and risk of Sellers. (A) Buyer shall conduct the defense of or opposition to such Third Party Claim as would a reasonable and prudent Person to whom no indemnity is available. (B) Buyer and Sellers' Agent and their respective counsel or other representatives shall cooperate in good faith with respect to such Third Party Claim. (C) Buyer shall not compromise or settle such Third Party Claim or consent to entry of any judgment, without the written consent of Sellers' Agent, which consent shall not be unreasonably withheld or delayed. (f) Anything herein to the contrary notwithstanding: (i) Sellers' Agent (on behalf of Sellers) shall have the right, at Sellers' own cost and expense, to participate in the defense, opposition, compromise or settlement of any Third Party Claim; (ii) Sellers' Agent shall not, without Buyer's written consent, settle or compromise any Third Party Claim or consent to entry of any judgment which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to Buyer of a release from all liability in respect of such Third Party Claim or which includes any non-monetary relief; and (iii) in the event that Sellers' Agent 48 undertakes defense of or opposition to any Third Party Claim, Buyer, by counsel of its own choosing and at its sole cost and expense, shall have the right to consult with Sellers' Agent and its counsel or other representatives concerning such Third Party Claim; and (iv) Sellers' Agent and Buyer and their respective counsel or other representatives shall cooperate in good faith with respect to any Third Party Claim. (g) Any Third Party Claim not disputed shall be paid by Sellers within thirty (30) days after receiving notice of the Third Party Claim. A "Disputed Claim" shall mean a Third Party Claim which Sellers' Agent objects to in writing within thirty (30) days after receiving notice of the Third Party Claim. In the event there is a Disputed Claim, Sellers shall be required to pay Buyer the amount of all Damages for which Sellers have been found liable, such payment to be made within ten (10) days after there is a final determination with respect to such Disputed Claim. A final determination of a Disputed Claim shall be (i) a judgment of any court determining the validity of such Disputed Claim, if no appeal is pending from such judgment and if the time to appeal therefrom has elapsed; (ii) an award of any arbitration determining the validity of such Disputed Claim, if there is not pending any motion to set aside such award and if the time within which to move to set aside such award has elapsed; (iii) a written determination of the dispute with respect to such Disputed Claim signed by the parties thereto (specifically including Sellers' Agent if Sellers' Agent has elected to participate in such determination as provided in this Section 7.1) or their attorneys; (iv) a written acknowledgment of Sellers or Sellers' Agent that Sellers no longer dispute the validity of such claim or (v) such other evidence of final determination of a Disputed Claim as shall be acceptable to the parties thereto (specifically including Sellers' Agent if Sellers' Agent has elected to participate in such determination as provided in this Section 7.1). No undertaking of defense or opposition to a Third Party Claim by Sellers' Agent or Sellers shall be construed as an acknowledgment by Sellers that they are liable to Buyer with respect to the Third Party Claim at issue or other similar Third Party Claims. Section 7.2 Limitation of Indemnification Liability. Except to the extent --------------------------------------- expressly provided in Section 7.2(g), the liability of any Indemnifying Party for indemnification under Section 7.1 and for all other claims under this Agreement or with respect to the Purchase and Exchange shall be limited as follows: (a) Except as provided in Section 2.2(b), the indemnification provisions contained in this Article VII set forth the exclusive remedies for money damages owing from Sellers to the Buyer Indemnified Parties and from Buyer to the Seller Indemnified Parties that arise under this Agreement. Buyer shall have no indemnification obligations under this Article VII in the event that the Escrow Deposit and all earnings thereon are payable to Sellers pursuant to the third sentence of Section 2.2(b). (b) Except with respect to Damages otherwise indemnifiable hereunder arising out of (i) the breach of the representations and warranties contained in Section 3.1, 3.2, 49 3A.1, 3.6, 4.1, 4.2 or 4.6, (ii) Buyer's failure to satisfy its obligations to pay the Cash Consideration as provided in Section 2.2 or (iii) the failure of Buyer or Sellers' Agent's and Sellers to satisfy their respective payment obligations in respect of the Net Working Capital Adjustments as provided in Section 2.6, no Indemnifying Party shall have any liability for any Damages otherwise indemnifiable by such Indemnifying Party hereunder unless the aggregate amount of Damages exceeds $1,000,000, in which event the Indemnifying Party shall have liability for such Indemnifiable Damages only to the extent that the aggregate amount of such Damages exceeds $250,000. (c) No Indemnifying Party shall have any liability for any Damages with respect to which a Notice of Claim has not been given to the Sellers' Agent or Buyer (as applicable) prior to the applicable Expiration Date. The Indemnifying Party shall continue to be liable for any Indemnity Claim for which a Notice of Claim has been given prior to the applicable Expiration Date until such Indemnity Claim has been satisfied or otherwise resolved as provided in this Article VII. (d) Except with respect to Damages otherwise indemnifiable hereunder arising out of the breach of the representations and warranties contained in Section 3.1, 3.2, 3A.1, 3.6, 4.1, 4.2 or 4.6, no Indemnifying Party shall have any liability for any Damages otherwise indemnifiable by such Indemnifying Party hereunder to the extent that the aggregate amount of such Damages exceeds $7,000,000. (e) Except as otherwise set forth in Section 7.1(a), no Indemnifying Party shall have liability for any Damages otherwise indemnifiable hereunder arising out of (i) any matter disclosed in all material respects in this Agreement (including the Exhibits hereto and Schedules) or in any agreement, certificate, document or other instrument delivered by or on behalf of any Indemnifying Party pursuant to this Agreement or (ii) any matter known to Buyer or Sellers, as applicable, as of the Closing Date. (f) Sellers shall not have liability for any Damages to the extent that the matter forming the basis for such Damages was taken into account in the calculation of Closing Net Working Capital. (g) Notwithstanding anything to the contrary contained herein, the limitations on the Indemnifying Parties' indemnification liability in this Section 7.2 shall not apply to (i) common law fraud or any right of recission or (ii) equitable relief in the nature of specific performance or injunctive relief with respect to this Agreement prior to the Closing Date. In addition, no indemnification under this Article VII shall apply to any breaches by any party under the Escrow Agreement, the Partnership Rights Agreements or the Employment Termination and Non-Competition Agreement and each party to such agreements shall have good remedies as may be available at law or in equity with respect to any such breaches. 50 Section 7.3 Definition of Damages or Damages. For purposes of this -------------------------------- Agreement, "Damage" or "Damages" shall mean any and all liabilities, losses, damages, actions, suits, proceedings, claims, demands, judgments, costs and expenses (including reasonable accountants' and attorneys' fees) of every nature and character (but specifically excluding indirect costs or special or consequential damages) arising out of the matters or circumstances referred to in Section 7.1. The amount of any indemnifiable Damages hereunder shall be reduced by the amount of (a) insurance proceeds actually received net of deductibles, incidental expenses and costs of collection, (b) proceeds (other than insurance proceeds) or amounts from third parties (regardless of when received but only if actually received), and (c) any tax benefits which are reasonably anticipated to be realized by the Buyer Indemnified Parties or the Seller Indemnified Parties, as applicable, in each case of clauses (a), (b) or (c), in connection with or as a result of such Damages. Section 7.4 Survival. -------- (a) The representations, warranties, covenants and agreements shall survive the Closing for the applicable Expiration Date. For this purpose, the Expiration Date shall mean: (i) With respect to the representations and warranties contained in Sections 3.15 and 4.11, the Expiration Date shall be that date that is 30 days after the expiration of the applicable statute of limitations (as it may be extended under applicable law). (ii) With respect to all other representations and warranties contained in this Agreement, the Expiration Date shall be the first anniversary of the Closing Date. (iii) With respect to the covenants and agreements contained in this Agreement, the Expiration Date shall be that date on which the applicable statute of limitations expires. ARTICLE VIII Termination Section 8.1 Termination. This Agreement (other than with respect to ----------- Sections 5.2(a) and 8.2) may be terminated at any time prior to the Closing: (a) by mutual consent of all the parties hereto; (b) by Buyer, on the one hand, or by Sellers, on the other hand (considering Buyer to be one party, and Sellers to be one party, for the purposes of this Section 8.1(b)), if 51 (i) the Closing shall not have occurred prior to the first anniversary of the date hereof; (ii) if all of the conditions to the other party's obligations to consummate the Purchase and Exchange and the Closing provided in Article VI shall have been satisfied and the other party fails to close the Purchase and Exchange on the Closing Date; or (iii) if the Mass Media Bureau or the FCC en banc by written order refuses to approve without a hearing the FCC Applications for all the Radio Stations owned by all the Radio Station Companies, or if the FCC issues its order granting approval of any such FCC Application but with a condition materially adverse to Buyer or any Seller and the party to which the condition applies does not elect (or with a condition materially adverse to any Company and Buyer does not elect to cause such Company) to comply with such condition within fifteen (15) days after the date the FCC's order becomes a Final Order; provided, that neither party may terminate this Agreement pursuant to this Section 8.1(b) if it is at that time in material breach of this Agreement; (c) by Buyer if any loss, damage or other occurrence prevents broadcast transmissions by WICC AM, WEBE FM, WRKI FM, WFAS AM or WFAS FM for more than three continuous days, provided that if Buyer does not terminate this Agreement pursuant to this Section 8.1(c) within ten days of notice by Sellers' Agent (which notice Sellers' Agent shall give as soon as practicable after it becomes aware of any loss, damage or other occurrence which is reasonably likely to prevent broadcast transmissions by any Radio Station for more than three continuous days), Sellers shall, jointly and severally, at Sellers' expense, cause the Radio Station Company that owns and operates such Radio Station promptly to restore transmissions and replace the damaged property in a manner substantially similar to that previously conducted or existing (the "Sellers Repairs") and, in such event, Buyer shall not be entitled to terminate this Agreement by reason of such failure to broadcast. If the Sellers Repairs have not been completed at the time the Closing would otherwise be held, then the Closing shall be deferred until a date within fifteen days after Sellers' Agent has notified Buyer of the completion of the Sellers Repairs, the Closing Date to be selected by Sellers upon not less than five days' prior notice to Buyer. If the Sellers Repairs have not been completed and Buyer so notified by the close of business on the tenth day following date on which the Closing would otherwise have occurred, Buyer may terminate this Agreement. If the Closing Date would be after the period permitted by the FCC's Final Orders, Sellers and Buyer shall file an appropriate application with the FCC for an extension of time within which to complete the Closing. Notwithstanding anything in this Section 8.1(c) to the contrary, if the Sellers Repairs would cost in the aggregate more than $1,000,000 in excess of amounts covered by insurance, Sellers may terminate this Agreement unless Buyer agrees to bear the cost in excess of $1,000,000. The need for any Sellers Repairs shall not constitute a breach by Sellers of any covenant, representation or warranty hereunder, if Sellers fulfill their obligations under this Section 8.1(c); 52 (d) by Sellers if any loss, damage or other occurrence prevents broadcast transmissions by WPST FM, WJLK FM or WOBM FM for more than three continuous days, provided that if Sellers do not terminate this Agreement pursuant to this Section 8.1(d) within ten days of notice by Buyer (which notice Buyer shall give as soon as practicable after it becomes aware of any loss, damage or other occurrence which is reasonably likely to prevent broadcast transmissions by any such radio station for more than three continuous days), Buyer shall, at Buyer's expense, cause the Nassau Company that owns and operates such radio station promptly to restore transmissions and replace the damaged property in a manner substantially similar to that previously conducted or existing (the "Buyer Repairs") and, in such event, Seller shall not be entitled to terminate this Agreement by reason of such failure to broadcast. If the Buyer Repairs have not been completed at the time the Closing would otherwise be held, then the Closing shall be deferred until a date within fifteen days after Buyer has notified Sellers' Agent of the completion of the Buyer Repairs, the Closing Date to be selected by Buyer upon not less than five days' prior notice to Sellers' Agent. If the Buyer Repairs have not been completed and Sellers' Agent so notified by the close of business on the tenth day following date on which the Closing would otherwise have occurred Seller may terminate this Agreement. If the Closing Date would be after the period permitted by the FCC's Final Orders, Sellers and Buyer shall file an appropriate application with the FCC for an extension of time within which to complete the Closing. Notwithstanding anything in this Section 8.1(d) to the contrary, if the Buyer Repairs would cost in the aggregate more than $1,000,000 in excess of amounts covered by insurance, Buyer may terminate this Agreement unless Sellers agree to bear the cost in excess of $1,000,000. The need for any Buyer Repairs shall not constitute a breach by Buyer of any covenant, representation or warranty hereunder, if Buyer fulfills its obligations under this Section 8.1(d); (e) by Sellers if the FCC shall not have granted its consent to the transactions contemplated by the Master Agreement and such grant shall not have become a Final Order by the earlier of the Closing Date or June 30, 2000. Section 8.2 Effect of Termination. Upon termination of this Agreement --------------------- pursuant to any provision of this Article VIII, this Agreement shall be void and of no other effect, and there shall be no liability by reason of this Agreement or the termination hereof on the part of any party hereto or on the part of the respective directors, officers, employees, agents or shareholder of any of them, in each case except for the willful breach of any representations, warranties, covenant or agreements contained herein, provided, that in the event of such -------- termination, no Seller shall have any liability by reason of the breach by any Seller of any representation, warranty, covenant or agreement contained herein and any such liability under this Section 8.2 shall be born by Aurora Communications, and provided further, that in the event that such termination ---------------- occurs in connection with a Payment Event, Sellers' sole and exclusive remedy with respect thereto shall be the payment of the Escrow Deposit and the earnings thereon pursuant to Section 2.2(b) and the Escrow Agreement. 53 ARTICLE IX Miscellaneous Section 9.1 Control of the Radio Stations. Between the date hereof and the ----------------------------- Closing Date, Buyer shall not directly or indirectly control, supervise or direct or attempt to control, supervise or direct the operation of any of the Radio Stations, but such operation shall be the sole responsibility of and in the complete discretion of Sellers and the Companies, subject only to the provisions of this Agreement. Section 9.2 Benefitting Sellers. The representations, warranties, covenants ------------------- and agreements of Buyer in this Agreement are made for the benefit of all of the Sellers, except that (x) the representations and warranties of Buyer in Article IV (other than in Section 4.1, 4.6, 4.12 and 4.17), and (y) the covenants of Buyer in Section 5.3 (other than in clause (a)(iv)(i) thereof), are made solely for the benefit of the Continuing Sellers, and no Exiting Seller or any officer, director, partner, member, employee, Affiliate, agent, representative, successor or assign of any Exiting Seller shall be entitled to any indemnification under Article VII on the basis of any such provision of this Agreement so stated to be solely for the benefit of the Continuing Sellers. Section 9.3 Buyer Incorporation. In the event that the Buyer Incorporation ------------------- occurs before or simultaneously with the Closing: (a) All provisions of this Agreement relating to NBP (but solely as such provisions relate to NBP) shall be deemed to have no effect, provided that the rights and obligations of NBP under the indemnification provisions of Article VII (and any provision of this Agreement that would form the basis of an Indemnity Claim thereunder) shall continue to be effective to the extent that either (i) NBP shall have suffered any Damages otherwise indemnifiable under such Article or (ii) any Seller shall have suffered any Damages otherwise indemnifiable under such Article based on the breach of any representation or warranty of NBP made on the date of the execution of this Agreement or the breach of any covenant or agreement of NBP in this Agreement which constitutes an obligation of NBP to be satisfied before the earlier of the Buyer Incorporation or the Closing. (b) All references to "Buyer" in this Agreement shall be deemed to be references to (i) Nassau Broadcasting Partners, L.P. before the occurrence of the Buyer Incorporation or (ii) the corporate successor of Buyer from and after the occurrence of the Buyer Incorporation. 54 (c) Buyer shall have the right to amend any disclosure Schedule (including Schedules 4.1(d) and 4.2) before or at the time of the Closing solely to reflect the occurrence of the Buyer Incorporation, provided that such amendment is not materially adverse to Sellers. Section 9.4 Assignment of Rights; Successors and Assigns. -------------------------------------------- (a) Sellers acknowledge that Buyer may assign its rights under this Agreement to (i) the corporate successor of Buyer pursuant to the Buyer Incorporation and (ii) the institutional lender or lenders which provide Buyer with financing for the Purchase and Exchange (as security for such financing), provided that such assignment shall not be effective unless Buyer shall have defaulted on its obligations to such institutional lender or lenders under the agreements governing such financing. (b) This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns; provided, that, except as provided in Section 9.4(a), this Agreement cannot be assigned in whole or in part by any party without the express written consent of each of the other parties and no provision of this Agreement shall be enforceable by, or create or evidence any right of, any third party. Section 9.5 Notices. All notices, requests, demands or other communications ------- in connection with this Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand; or when sent by facsimile transmission, receipt confirmed; or when mailed by first class, certified mail, postage prepaid; in each case as follows: (A) If to any Sellers or Sellers' Agent: BancAmerica Capital Investors SBIC I, L.P. 100 North Tryon Street, 25th Floor Charlotte, North Carolina 28255 Attention: Robert H. Sheridan, III Attention: Craig A. Elson Facsimile: 704-386-6432 with a copy to: Kennedy Covington Lobdell & Hickman, L.L.P. Bank of America Corporate Center 100 North Tryon Street, Suite 4200 Charlotte, North Carolina 28202 Attention: Eugene C. Pridgen, Esq. Facsimile: 704-331-7598 55 (B) If to Buyer: Nassau Broadcasting Partners, L.P. c/o Nassau Broadcasting Partners, Inc. 619 Alexander Road, Third Floor Princeton, New Jersey 08540 Attention: Michael S. Libretti Facsimile: 609-452-6017 with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Attention: Phyllis G. Korff, Esq. Facsimile: 917-777-2694 Section 9.6 Expenses. Each party shall bear the expenses incurred by it in -------- connection with the preparation and consummation of this Agreement and its portion of the FCC Applications and all reports, notifications and other documents or filings under the HSR Act contemplated hereby. Buyer, on the one hand, and the Companies, on the other hand, shall share equally all FCC filing fees in connection with the FCC Applications and all Department of Justice and Federal Trade Commission filing fees in connection with such agencies' review of the transactions contemplated by this Agreement under the HSR Act. All expenses of the Companies under this Section 9.6 shall be accrued as current liabilities on the Closing Balance Sheet. The Corporation Sellers shall pay any stock transfer taxes incurred in connection with the transfer of the AMI Shares or the AAA Shares, as applicable. Section 9.7 Appointment of Sellers' Agent. Each Seller appoints the ----------------------------- Sellers' Agent (with full power of substitution) as his or its agent and attorney-in-fact to act for him or it and in his or its name in connection with all matters related to this Agreement and the other agreements contemplated hereby (collectively the "Transaction Agreements") and the transactions contemplated by the Transaction Agreements, and each of them gives the Sellers' Agent full power and authority to deliver certificates or other evidence of ownership for his or its Subject Interests, to take all action contemplated to be taken by the Sellers' Agent under the Transaction Agreements, to receive on his or its behalf the purchase price for his Equity Interests payable pursuant to Article II, to execute amendments to the Transaction Agreements (so long as such amendment has been properly authorized by Sellers pursuant to Section 9.15), to give and receive all notices and other communications relating to the Transaction Agreements, and to execute any instruments and documents that the Sellers' Agent may determine necessary in the exercise of his authority pursuant to this power of attorney, all without notice to any of them and with the same effect as if they had themselves taken such action; and each of the Sellers 56 acknowledges and agrees that they shall be bound by, and Buyer and NBP may rely and act upon, any action taken by Sellers' Agent on behalf of the Sellers and upon any instruments and documents signed by him with the same force and effect as if they had themselves so acted. By his execution hereof, Sellers' Agent hereby accepts such appointment and agrees to act as Sellers' Agent under the Transaction Agreements and in connection therewith. Sellers' Agent shall not be liable to Sellers for any action taken or omitted by Sellers' Agent in good faith, and in no event shall Sellers' Agent be liable or responsible except for his own gross negligence or willful misconduct. Sellers shall be liable, jointly and severally, to hold Sellers' Agent (acting in such capacity, but not in his capacity as a Seller) harmless from, and to indemnify and reimburse Sellers' Agent for, all amounts paid by Sellers' Agent pursuant to the Transaction Documents and all claims, liabilities, losses, and expenses (including out-of-pocket and incidental expenses reasonably incurred and reasonable legal fees) arising in connection with any action, suit or claim arising under the Transaction Agreements, provided that Sellers' Agent has not acted with gross negligence, bad faith or willful misconduct with respect to any of the events relating to such claims, liabilities, losses or expenses. Section 9.8 Remedies. (a) Sellers acknowledge that the Subject Interests to -------- be sold and exchanged pursuant to this Agreement are unique and that Buyer has no adequate remedy at law if Sellers and the Companies shall fail to perform any of their obligations hereunder, and Sellers therefore confirm and agree that Buyer's right to specific performance is essential to protect the rights and interests of Buyer. Accordingly, in addition to any other remedies that Buyer may have hereunder or at law or in equity or otherwise, Sellers hereby agree that Buyer shall have the right to have all obligations, undertakings, agreements and other provisions of this Agreement specifically performed by Sellers and the Companies, and that Buyer shall have the right to obtain an order or decree of such specific performance, or other equitable relief, in any court of competent jurisdiction. (b) Except as otherwise set forth in Sections 2.2(b) and 8.2, Buyer acknowledges that the NBP Common Stock and the Nassau Equity Interests to be sold and exchanged pursuant to this Agreement are unique and that Sellers have no adequate remedy at law if Buyer and NBP shall fail to perform any of their obligations hereunder, and Buyer and NBP therefore confirm and agree that, subject to Sections 2.2(b) and 8.2, Sellers' right to specific performance is essential to protect the rights and interests of Sellers. Accordingly, except as otherwise set forth in Sections 2.2(b) and 8.2, in addition to any other remedies that Sellers may have hereunder or at law or in equity or otherwise, Buyer hereby agrees that Sellers shall have the right to have all obligations, undertakings, agreements and other provisions of this Agreement specifically performed by Buyer and NBP, and that Sellers shall have the right to obtain an order or decree of such specific performance, or other equitable relief, in any court of competent jurisdiction. 57 Section 9.9 Publicity and Disclosures. No press release or other public ------------------------- disclosure, either written or oral, of the Purchase and Exchange or any of the other transactions contemplated hereby shall be made by any of the parties without the prior knowledge and consent of the other parties. Section 9.10 Interpretation. When a reference is made in this Agreement to -------------- an Article, Section, Schedule or Exhibit, such reference shall be to an Article or Section of, or Schedule or an Exhibit to, this Agreement unless otherwise indicated. The words "include," "includes" and "including" when used herein shall be deemed in each case to be followed by the words "without limitation." The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. When reference is made herein to "the business of" a Person, such reference shall be deemed to include the business of all direct and indirect subsidiaries of such Person. Reference to the subsidiaries of a Person shall be deemed to include all direct and indirect subsidiaries of such Person. Section 9.11 Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed an original and which together constitute the same agreement. Section 9.12 No Implied Waiver. No failure or delay on the part of a party ----------------- hereto to exercise any right, power or privilege shall be deemed a waiver of any rights and remedies to which such party may be entitled. Section 9.13 Entire Agreement. This Agreement (which includes the Schedules ----------------- and Exhibits hereto) sets forth the entire understanding of the parties with respect to the subject matter hereof and, incorporates and merges any and all previous communications, understandings and agreements, oral or written. Section 9.14 Governing Law. This Agreement shall be governed by and ------------- construed and enforced in accordance with the laws of the State of Delaware (without reference to such State's conflicts of law rules) except with respect to matters governed by federal law relating to radio communications. Section 9.15 Amendment. Subject to applicable law, this Agreement may be --------- amended or supplemented only by a writing signed by Buyer, Sellers (subject to the last sentence of this Section 9.15) and each other party hereto whose rights or obligations are affected by such amendment or supplement. No waiver of compliance with any provision or condition of this Agreement shall be effective unless evidenced by a writing signed by the party against whom enforcement of such waiver is sought. Notwithstanding the foregoing, any amendment, supplement or waiver of any provision or condition of this Agreement shall be binding on all of the Sellers (and Sellers' Agent) if evidenced by a writing signed by Sellers entitled to receive a 58 majority of the consideration to be received by Sellers hereunder or by Sellers' Agent; provided that any amendment, supplement or waiver that would change the amount, form or timing of receipt of the consideration to be provided to Sellers by Buyer hereunder or would otherwise materially adversely affect the rights of the Exiting Sellers relative to Continuing Sellers shall not be effective unless signed by each Seller. [signatures on following pages] 59 IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written. BUYER: NASSAU BROADCASTING PARTNERS, L.P. By: Nassau Broadcasting Partners, Inc., as Managing General Partner By: /s/ Louis F. Mercatanti, Jr. ---------------------------------------- Name: Louis F. Mercatanti, Jr. Title: President SELLERS: BANCAMERICA CAPITAL INVESTORS SBIC I, L.P., AS A SELLER AND AS SELLERS' AGENT By: BANCAMERICA CAPITAL MANAGEMENT SBIC I, LLC, its general partner By: BANCAMERICA CAPITAL MANAGEMENT I, L.P., its sole member By: BACM I GP, LLC, its general partner By: /s/ Robert H. Sheridan III ---------------------------------------- Name: Robert H. Sheridan III Title: Managing Director FRANK D. OSBORN ALLISON WAITE OSBORN CAROLINE LADNER OSBORN ELIZABETH ANDREW OSBORN FRANK WILLIAM OSBORN KATHERINE NELSON OSBORN /s/ Frank D. Osborn ------------------------------------------- Frank D. Osborn, on behalf of himself and as Attorney-in-Fact /s/ Frank G. Washington ------------------------------------------- Frank G. Washington /s/ Vincent M. Cremona ------------------------------------------- Vincent M. Cremona HELLER FINANCIAL, INC. By: /s/ Matthew Kirst ---------------------------------------- Name: Matthew Kirst Title: Vice President ALLIED CAPITAL CORPORATION By: /s/ Thomas H. Westbrook ---------------------------------------- Name: Thomas H. Westbrook Title: Principal ALLIED INVESTMENT CORPORATION By: /s/ Thomas H. Westbrook ---------------------------------------- Name: Thomas H. Westbrook Title: Principal UNIONBANCAL VENTURE CORPORATION By: /s/ Terri S Lang ---------------------------------------- Name: Terri S Lang Title: VP By: /s/ J. Kevin Sampson ---------------------------------------- Name: J. Kevin Sampson Title: VP AURORA MANAGEMENT GROUP, LLC By: /s/ Frank D. Osborn ---------------------------------------- Frank D. Osborn Authorized Person NASSAU BROADCASTING PARTNERS, INC. By: /s/ Louis F. Mercatanti, Jr. ---------------------------------------- Name: Louis F. Mercatanti, Jr. Title: President AURORA COMMUNICATIONS, LLC, solely with respect to its rights, duties, obligations and with agreements set forth in Section 8.2 hereof By: AURORA MANAGEMENT, INC., its sole Manager By: /s/ Frank D. Osborn ---------------------------------------- Name: Title: 63 EX-2.2 3 0003.txt AMENDMENT #1 TO PURCHASE & EXCHANGE AGMT EXHIBIT 2.2 AMENDMENT NO. 1 TO PURCHASE AND EXCHANGE AGREEMENT -------------------------------------------------- This Amendment No. 1, dated as of May 4, 2000 (this "Amendment Agreement"), is made and entered into by and among Nassau Broadcasting Partners, L.P., a Delaware limited partnership ("Buyer"), the parties hereto listed as "Sellers" on the signature pages hereof (collectively, "Sellers"), BancAmerica Capital Investors SBIC I, L.P., as agent for the Sellers ("Sellers' Agent"), and Nassau Broadcasting Partners, Inc., a Delaware corporation and the managing general partner of Buyer ("NBP"), for the purpose of amending the Purchase and Exchange Agreement, dated as of March 24, 2000 (the "Purchase and Exchange Agreement"), by and among the foregoing parties. RECITALS: --------- WHEREAS, the parties hereto entered into the Purchase and Exchange Agreement for the purposes specified therein; WHEREAS, the parties hereto desire to amend certain portions of the Purchase and Exchange Agreement; WHEREAS, in order to carry out the foregoing objectives, the parties hereto desire to enter into this Amendment Agreement; NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements contained herein and in the Purchase and Exchange Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. Defined Terms. All initially capitalized terms used herein ------------- and not otherwise defined shall have the respective meanings ascribed thereto in the Purchase and Exchange Agreement. Section 2. Certain Definitions. The following definitions shall be ------------------- added to Section 1.1 of the Purchase and Exchange Agreement: "Mezzanine Investors" means Merrill Lynch Capital Corporation, OZ Master Fund, Ltd., Caisse de Depot et Placement du Quebec, The Bank of Nova Scotia, Bank of Montreal and any other holders of any Nassau Equity Interests which have been issued in accordance with the provisions of the Units Purchase Agreement dated as of May 4, 2000, between Buyer, Merrill Lynch Capital Corporation and the other purchasers named therein (the "Units Purchase Agreement"). "Mezzanine Registration Rights Agreement" means the Common Stock Registration Rights Agreement dated as of May 4, 2000 entered into between Buyer and Merrill Lynch Capital Corporation and certain other persons. "Original Investors" means Spectrum Equity Investors, L.P., Spectrum Equity Investors II, L.P., Grotech Partners IV, L.P., Toronto Dominion (U.S.A.), Inc., Nassau Holdings, Inc., Noel P. Rahn and Nassau Broadcasting Company. "Original Investors' Registration Rights Agreement" means the Registration Rights Agreement to be dated on or about the date of this Agreement, entered into between Buyer and the Original Investors. "Permitted Distribution" means the Second Contingent Amount as defined in the Third Restated Agreement of Limited Partnership of Buyer, to be made by Buyer to Louis F. Mercatanti Jr. upon the issuance of the Nassau Mezzanine Notes. Section 3. Antidilution. Buyer confirms that the issuance of Nassau ------------ Equity Interests (including without limitation the "Initial LP Units," the "Incremental LP Units" and the "Antidilutive Initial LP Units" as such terms are defined in the Units Purchase Agreement) to the Mezzanine Investors pursuant to the Units Purchase Agreement shall not in any manner whatsoever affect, as applicable, (i) the minimum percentage of the aggregate Nassau Equity Interests issuable to the Continuing Sellers pursuant to Section 2.4(e)(i) of the Purchase and Exchange Agreement or (ii) the minimum percentage of the aggregate Nassau Partnership Interests issuable to the Continuing Sellers pursuant to Section 2.4(f)(i) of the Purchase and Exchange Agreement and the minimum percentage of NBP Common Stock issuable to the Continuing Sellers pursuant to Section 2.5 of the Purchase and Exchange Agreement. Buyer further confirms that Buyer will issue Antidilutive Aurora LP Investor Units (as such term is defined in the Units Purchase Agreement) to the Continuing Sellers pursuant to and in accordance with Section 2.01 of the Units Purchase Agreement in order to maintain the minimum percentages described in the immediately preceding clauses (i) and (ii). Section 4. Registration Rights Agreement. Section 4.2(b) of the ----------------------------- Registration Rights Agreement contained in Exhibit C of the Purchase and Exchange Agreement is hereby amended in its entirety to read as follows: 2 "If, in the opinion of the managing underwriter or underwriters selected by the Company, it is appropriate to limit the amount of Registrable Securities to be included in the offering, then the Company shall be required to include in the registration only that amount of Registrable Securities, if any, which the managing underwriter or underwriters reasonably believe should be included therein. In such event: (1) in cases only involving the registration for sale of securities for the Company's own account (which may include securities included pursuant to the exercise of piggy-back rights herein and in other contractual commitments of the Company), securities shall be registered in such offering in the following order of priority: (i) first, the securities which the Company proposes to register, (ii) second, provided that no securities sought to be included by the Company have been excluded from such registration, the securities which have been requested to be included in such registration by the Securityholders pursuant to this Agreement on a pari passu basis with (x) any securities of the Company as to which the Mezzanine Investors may be entitled to exercise "piggy-back" registration rights pursuant to the Mezzanine Registration Rights Agreement and (y) any securities of the Company as to which the Original Investors may be entitled to exercise "piggy-back" registration rights pursuant to the Original Investors' Registration Rights Agreement (such securities for the account of the Securityholders, the Mezzanine Investors and the Original Investors to be allocated among such Securityholders, the Mezzanine Investors and the Original Investors pro rata based on the amount of securities sought to be registered by the Securityholders, the Mezzanine Investors and the Original Investors) and (iii) third, provided that no securities sought to be included by the Company, the Securityholders, the Mezzanine Investors or the Original Investors have been excluded from such registration, the securities of any other Persons entitled to exercise "piggy-back" registration rights pursuant to contractual commitments of the Company (pro rata based on the amount of securities sought to be registered by such Persons); and (2) in cases not involving the registration for sale of securities for the Company's own account only, securities shall be registered in such offering in the following order of priority: (i) first, securities to be sold for the account of the Company and the securities of any Person whose exercise of a "demand" registration right pursuant to a contractual commitment of the Company is the basis for the registration, (ii) second, provided that no securities of the Company or 3 such Person referred to in the immediately preceding clause (i) have been excluded from such registration, the securities requested to be included in such registration by the Securityholders (excluding those of any Securityholder who is also a Person referred to in the immediately preceding clause (i)) pursuant to this Agreement on a pari passu basis with (x) any securities of the Company as to which the Mezzanine Investors may be entitled to exercise "piggy-back" registration rights pursuant to the Mezzanine Registration Rights Agreement and (y) any securities of the Company as to which the Original Investors may be entitled to exercise "piggy-back" registration rights pursuant to the Original Investors' Registration Rights Agreement (such securities for the account of the Securityholders, the Mezzanine Investors and the Original Investors to be allocated among the Securityholders, the Mezzanine Investors and the Original Investors pro rata based on the amount of securities sought to be registered by the Securityholders, the Mezzanine Investors and the Original Investors) and (iii) third, provided that no securities of the Company or such Person referred to in the immediately preceding clause (i) or of the Securityholders, the Mezzanine Investors or the Original Investors referred to in the immediately preceding clause (ii) have been excluded from such registration, securities of any other Persons entitled to exercise "piggy- back" registration rights pursuant to contractual commitments (pro rata based on the amount of securities sought to be registered by such Persons)." Section 5. Restated Securityholders' Agreement. The Purchase and ----------------------------------- Exchange Agreement is hereby amended as follows: (a) the reference in the Table of Contents of the Purchase and Exchange Agreement to "Exhibit E Second Amended and Restated Securityholders' Agree ment," is hereby replaced with the reference "Exhibit E Third Amended and Restated Securityholders' Agreement"; (b) all references to "Second Amended and Restated Securityholders' Agreement" are hereby changed to "Third Amended and Restated Securityholders' Agreement"; and (c) Exhibit E is hereby replaced in its entirety with Exhibit E contained in Exhibit A to this Amendment Agreement. 4 Section 6. Amendment to Restated Investment Agreement. The Purchase ------------------------------------------ and Exchange Agreement is hereby amended to remove Exhibit F, Form of Amendment to Restated Investment Agreement, and all references in the Purchase and Exchange Agreement to Exhibit F are hereby deleted. Section 7. Restated Agreement of Limited Partnership. The Purchase and ----------------------------------------- Exchange Agreement is hereby amended as follows: (a) the reference in the Table of Contents of the Purchase and Exchange Agreement to "Exhibit G Fourth Restated Agreement of Limited Partnership," is hereby replaced with the reference "Exhibit G Form of Fifth Restated Agreement of Limited Partnership"; (b) all references to "Fourth Restated Agreement of Limited Partnership" are hereby changed to "Fifth Restated Agreement of Limited Partnership"; and (c) Exhibit G is hereby replaced in its entirety with Exhibit G contained in Exhibit B to this Amendment Agreement. Section 8. Additional Covenants of Buyer/Dividends. Section --------------------------------------- 5.3(a)(vii) of the Purchase and Exchange Agreement is hereby amended in its entirety to read as follows: "Buyer will not declare or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any of its equity securities, or split, combine or reclassify any of its equity securities; provided, that (1) Buyer may make the Permitted Distribution and (2) any Nassau Company may pay such dividends or make such distributions to another Nassau Company." Section 9. Interpretation. When a reference is made in this Amendment -------------- Agreement to an Article, Section, Schedule or Exhibit, such reference shall be to an Article or Section of, or Schedule or an Exhibit to, the Purchase and Exchange Agreement unless otherwise indicated. Section 10. Counterparts. This Amendment Agreement may be executed in ------------ two or more counterparts, each of which shall be deemed an original and which together constitute the same agreement. 5 Section 11. Governing Law. This Amendment Agreement shall be governed ------------- by and construed and enforced in accordance with the laws of the State of Delaware (without reference to such State's conflicts of law rules). [Signatures on following pages] 6 IN WITNESS WHEREOF, the parties have duly executed this Amendment Agreement as of the date first above written. BUYER: NASSAU BROADCASTING PARTNERS, L.P. By: Nassau Broadcasting Partners, Inc., as Managing General Partner By: ----------------------------------------------------- Name: Title: SELLERS: BANCAMERICA CAPITAL INVESTORS SBIC I, L.P., AS A SELLER AND AS SELLERS' AGENT By: BANCAMERICA CAPITAL MANAGEMENT SBIC I, LLC, its general partner By: BANCAMERICA CAPITAL MANAGEMENT I, L.P., its sole member By: BACM I GP, LLC, its general partner By: ----------------------------------- Name: Robert H. Sheridan III Title: Managing Director FRANK D. OSBORN ALLISON WAITE OSBORN CAROLINE LADNER OSBORN ELIZABETH ANDREW OSBORN FRANK WILLIAM OSBORN KATHERINE NELSON OSBORN ------------------------------------------ Frank D. Osborn, on behalf of himself and as Attorney-in-Fact ------------------------------------------ Frank G. Washington ------------------------------------------ Vincent M. Cremona ------------------------------------------ HELLER FINANCIAL, INC. By: -------------------------------------- Name: Title: ALLIED CAPITAL CORPORATION By: -------------------------------------- Name: Title: ALLIED INVESTMENT CORPORATION By: -------------------------------------- Name: Title: UNIONBANCAL VENTURE CORPORATION By: -------------------------------------- Name: Title: By: -------------------------------------- Name: Title: AURORA MANAGEMENT GROUP, LLC By: -------------------------------------- Frank D. Osborn Authorized Person NASSAU BROADCASTING PARTNERS, INC. By: -------------------------------------- Name: Title: AURORA COMMUNICATIONS, LLC, solely with respect to its rights, duties, obligations and with agreements set forth in Section 8.2 of the Purchase and Exchange Agreement By: AURORA MANAGEMENT, INC., its sole Manager By: -------------------------------------- Name: Title: EX-2.3 4 0004.txt ASSET PURCHASE AGMT DTD 2/29/2000 EXHIBIT 2.3 ASSET PURCHASE AGREEMENT ------------------------ THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of February 29, 2000 among Clear Channel Broadcasting, Inc., a Nevada corporation ("CCB"), Clear Channel Broadcasting Licenses, Inc., a Nevada corporation ("CCBL") (CCB and CCBL, collectively, "Seller"), and Nassau Broadcasting Partners, L.P., a Delaware limited partnership ("Buyer"). Recitals -------- A. Seller owns and operates the following radio broadcast stations (collectively, the "Stations") pursuant to certain authorizations issued by the Federal Communications Commission (the "FCC"): WEEX (AM), Easton, Pennsylvania WODE-FM, Easton, Pennsylvania B. Subject to the terms and conditions set forth herein, Buyer desires to acquire the Station Assets (defined below). C. Clear Channel Communications, Inc. (Seller's parent), CCU Merger Sub, Inc. and AMFM Inc. are parties to an Agreement and Plan of Merger dated October 2, 1999 (the "AMFM Agreement"). Agreement --------- NOW, THEREFORE, taking the foregoing into account, and in consideration of the mutual covenants and agreements set forth herein, the parties, intending to be legally bound, hereby agree as follows: ARTICLE 1: PURCHASE OF ASSETS - ----------------------------- 1.1. Station Assets. On the terms and subject to the conditions hereof, on the Closing Date (defined below), Seller shall sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase and acquire from Seller, all of the right, title and interest of Seller in and to all of the assets, properties, interests and rights of Seller of whatsoever kind and nature, real and personal, tangible and intangible, which are used exclusively in the operation of the Stations and specifically described in this Section 1.1, but excluding the Excluded Assets as hereafter defined (the "Station Assets"): (a) all licenses, permits and other authorizations which are issued to Seller by the FCC with respect to the Stations (the "FCC Licenses") and described on Schedule 1.l(a), including any renewals or modifications thereof between the date hereof and Closing; (b) all equipment, electrical devices, antennae, cables, tools, hardware, office furniture and fixtures, office materials and supplies, inventory, motor vehicles, spare parts and other tangible personal property of every kind and description which are used exclusively in the operation of the Stations and listed on Schedule 1.1(b), except any retirements or dispositions thereof made between the date hereof and Closing in the ordinary course of business and consistent with past practices of Seller (the "Tangible Personal Property"); (c) all Time Sales Agreements and Trade Agreements (both defined in Section 2.1), Real Property Leases (defined in Section 7.7), and other contracts, agreements, and leases which are used in the operation of the Stations and listed on Schedule 1.1(c), together with all contracts, agreements, and leases made between the date hereof and Closing in the ordinary course of business that are used in the operation of the Stations (the "Station Contracts"); (d) all of Seller's rights in and to the Stations' call letters and Seller's rights in and to the trademarks, trade names, service marks, franchises, copyrights, computer software, programs and programming material, jingles, slogans, logos, and other intangible property which are used exclusively in the operation of the Stations and listed on Schedule 1.1(d) (the "Intangible Property"); (e) Seller's rights in and to all the files, documents, records, and books of account (or copies thereof) relating exclusively to the operation of the Stations, including the Stations' local public files, programming information and studies, blueprints, technical information and engineering data, advertising studies, marketing and demographic data, sales correspondence, lists of advertisers, credit and sales reports, and logs, but excluding records relating to Excluded Assets (defined below); and (f) any real property which is used exclusively in the operation of the Stations (including any of Seller's appurtenant easements and improvements located thereon) and described on Schedule 1.1(f) (the "Real Property"). The Station Assets shall be transferred to Buyer free and clear of liens, claims and encumbrances ("Liens") except for (i) Assumed Obligations (defined in Section 2.1), (ii) liens for taxes not yet due and payable and for which Buyer receives a credit pursuant to Section 3.3, (iii) such liens, easements, rights of way, building and use restrictions, exceptions, reservations and limitations that do not in any material respect detract from the value of the property subject thereto or impair the use thereof in the ordinary course of the business of the Stations, and (iv) any items listed on Schedule 1.1(b) (collectively, "Permitted Liens"). 1.2. Excluded Assets. Notwithstanding anything to the contrary contained herein, the Station Assets shall not include the following assets along with all rights, title and interest therein (the "Excluded Assets"): -2- (a) all cash and cash equivalents of Seller, including without limitation certificates of deposit, commercial paper, treasury bills, marketable securities, asset or money market accounts and all such similar accounts or investments; (b) all accounts receivable or notes receivable arising in the operation of the Stations prior to Closing; (c) all tangible and intangible personal property of Seller disposed of or consumed in the ordinary course of business of Seller between the date of this Agreement and Closing; (d) all Station Contracts that terminate or expire prior to Closing in the ordinary course of business of Seller; (e) Seller's name, corporate minute books, charter documents, corporate stock record books and such other books and records as pertain to the organization, existence or share capitalization of Seller, duplicate copies of the records of the Stations, and all records not relating exclusively to the operation of the Stations; (f) contracts of insurance, and all insurance proceeds or claims made thereunder; (g) except as provided in Section 10.4, all pension, profit sharing or cash or deferred (Section 401(k)) plans and trusts and the assets thereof and any other employee benefit plan or arrangement and the assets thereof, if any, maintained by Seller; and (h) all rights, properties and assets described on Schedule 1.2(h), and all rights, properties and assets not specifically described in Section 1.1. ARTICLE 2: ASSUMPTION OF OBLIGATIONS ------------------------- 2.1. Assumed Obligations. On the Closing Date, Buyer shall assume the obligations of Seller (the "Assumed Obligations") arising after Closing under the Station Contracts, including without limitation all agreements for the sale of advertising time on the Stations for cash in the ordinary course of business ("Time Sales Agreements") and all agreements for the sale of advertising time on the Stations for non-cash consideration ("Trade Agreements"). 2.2. Retained Obligations. Buyer does not assume or agree to discharge or perform and will not be deemed by reason of the execution and delivery of this Agreement or any agreement, instrument or document delivered pursuant to or in connection with this Agreement or otherwise by reason of the consummation of the transactions contemplated hereby, to have assumed or to have agreed to discharge or perform, any liabilities, obligations or commitments of Seller of any nature whatsoever whether accrued, absolute, contingent or otherwise and -3- whether or not disclosed to Buyer, other than the Assumed Obligations (the "Retained Obligations"). ARTICLE 3: PURCHASE PRICE -------------- 3.1. Purchase Price. In consideration for the sale of the Station Assets to Buyer, in addition to the assumption of the Assumed Obligations, Buyer shall at Closing (defined below) deliver to Seller by wire transfer of immediately available funds, Thirty Million Dollars ($30,000,000) subject to adjustment pursuant to Section 3.3 (the "Purchase Price"). 3.2. Deposit. On the date of this Agreement, Buyer shall deposit an amount equal to 20% of the Purchase Price (the "Deposit") with NationsBank/Bank of America (the "Escrow Agent") pursuant to the Escrow Agreement (the "Escrow Agreement") of even date herewith among Buyer, Seller and the Escrow Agent. At Closing, the Deposit shall be applied to the Purchase Price and any interest accrued thereon shall be disbursed to Buyer. If this Agreement is terminated by Seller due to Buyer's failure to consummate the Closing on the Closing Date or if this Agreement is otherwise terminated by Seller pursuant to Section 16.1(c), the Deposit and any interest accrued thereon shall be disbursed to Seller as partial payment of liquidated damages pursuant to Section 16.3. If this Agreement is terminated for any other reason, the Deposit and any interest accrued thereon shall be disbursed to Buyer. 3.3. Prorations and Adjustments. Except as otherwise provided herein, all deposits, reserves and prepaid and deferred income and expenses relating to the Station Assets or the Assumed Obligations and arising from the conduct of the business and operations of the Stations shall be prorated between Buyer and Seller in accordance with generally accepted accounting principles as of 11:59 p.m. on the date immediately preceding the Closing Date. Such prorations shall include, without limitation, all ad valorem, real estate and other property taxes (but excluding taxes arising by reason of the transfer of the Station Assets as contemplated hereby which shall be paid as set forth in Section 13.1), business and license fees, music and other license fees (including any retroactive adjustments thereof), utility expenses, amounts due or to become due under Station Contracts, rents, lease payments and similar prepaid and deferred items. Real estate taxes shall be apportioned on the basis of taxes assessed for the preceding year, with a reapportionment, if any, as soon as the new tax rate and valuation can be ascertained. Except as otherwise provided herein, the prorations and adjustments contemplated by this Section 3.3, to the extent practicable, shall be made on the Closing Date. As to those prorations and adjustments not capable of being ascertained on the Closing Date, an adjustment and proration shall be made within ninety (90) calendar days of the Closing Date. In the event of any disputes between the parties as to such adjustments, the amounts not in dispute shall nonetheless be paid at the time provided herein and such disputes shall be determined by an independent certified public accountant mutually acceptable to the parties, and the fees and expenses of such accountant shall be paid one-half by Seller and one-half by Buyer. 3.4. Allocation. The Purchase Price shall be allocated among the Station Assets in a manner as mutually agreed between the parties based upon an appraisal prepared by Bond & -4- Pecaro (whose fees shall be paid one-half by Seller and one-half by Buyer). Seller and Buyer agree to use the allocations determined pursuant to this Section 3.4 for all tax purposes, including without limitation, those matters subject to Section 1060 of the Internal Revenue Code of 1986, as amended. ARTICLE 4: CLOSING ------- 4.1. Closing. The consummation of the sale and purchase of the Station Assets (the "Closing") shall occur on a date (the "Closing Date") and at a time and place designated solely by Seller after FCC Consent (defined below), subject to satisfaction or waiver of the conditions to Closing contained herein (other than those to be satisfied at Closing). If requested by Seller, prior to Closing the parties shall hold a pre-closing conference at a time and place designated by Seller, at which the parties shall provide (for review only) all documents to be delivered at Closing under this Agreement, each duly executed but undated, and otherwise confirm their ability to timely consummate the Closing. ARTICLE 5: GOVERNMENTAL CONSENTS --------------------- Closing is subject to and conditioned upon (i) prior FCC consent (the "FCC Consent" to the assignment of the FCC Licenses to Buyer, (ii) United States Department of Justice ("DOJ") prior approval (the "DOJ Consent") of the transactions contemplated hereby, including without limitation any such approval as may be necessary to enable Seller to consummate the merger under the AMFM Agreement, and (iii) expiration or termination of any applicable waiting period ("HSR Clearance") under the HSR Act (defined below). 5.1. FCC. On a date designated by Seller, Buyer and Seller shall file an application with the FCC (the "FCC Application") requesting the FCC Consent. Buyer and Seller shall diligently prosecute the FCC Application and otherwise use their best efforts to obtain the FCC Consent as soon as possible. If the FCC Consent imposes upon Buyer any condition (including without limitation any divestiture condition), Buyer shall timely comply therewith. 5.2. HSR. If not previously filed, then within five (5) business days after the execution of this Agreement, Buyer and Seller shall make any required filings with the Federal Trade Commission and the DOJ pursuant to the Hart- Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") with respect to the transactions contemplated hereby (including a request for early termination of the waiting period thereunder), and shall thereafter promptly respond to all requests received from such agencies for additional information or documentation. 5.3. General. Buyer and Seller shall notify each other of all documents filed with or received from any governmental agency with respect to this Agreement or the transactions contemplated hereby. Buyer and Seller shall furnish each other with such information and assistance as such the other may reasonably request in connection with their preparation of any governmental filing hereunder. If Buyer becomes aware of any fact relating to it which would prevent or delay the FCC Consent, the DOJ Consent or HSR Clearance, Buyer shall promptly -5- notify Seller thereof and take such steps as necessary to remove such impediment, including but not limited to divesting any stations and terminating any agreements to acquire or program or market any stations. ARTICLE 6: REPRESENTATIONS AND WARRANTIES OF BUYER --------------------------------------- Buyer hereby makes the following representations and warranties to Seller: 6.1. Organization and Standing. Buyer is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, and is qualified to do business in each jurisdiction in which the Station Assets are located. Buyer has the requisite power and authority to execute and deliver this Agreement and all of the other agreements and instruments to be executed and delivered by Buyer pursuant hereto (collectively, the "Buyer Ancillary Agreements"), to consummate the transactions contemplated hereby and thereby and to comply with the terms, conditions and provisions hereof and thereof. 6.2. Authorization. The execution, delivery and performance of this Agreement and the Buyer Ancillary Agreements by Buyer have been duly authorized and approved by all necessary action of Buyer and do not require any further authorization or consent of Buyer. This Agreement is, and each Buyer Ancillary Agreement when executed and delivered by Buyer and the other parties thereto will be, a legal, valid and binding agreement of Buyer enforceable in accordance with its respective terms, except in each case as such enforceability may be limited by bankruptcy, moratorium, insolvency, reorganization or other similar laws affecting or limiting the enforcement of creditors' rights generally and except as such enforceability is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 6.3. No Conflicts. Neither the execution and delivery by Buyer of this Agreement and the Buyer Ancillary Agreements or the consummation by Buyer of any of the transactions contemplated hereby or thereby nor compliance by Buyer with or fulfillment by Buyer of the terms, conditions and provisions hereof or thereof will: (i) conflict with any organizational documents of Buyer or any law, judgment, order or decree to which Buyer is subject; or (ii) require the approval, consent, authorization or act of, or the making by Buyer of any declaration, filing or registration with, any third party or any foreign, federal, state or local court, governmental or regulatory authority or body, except the FCC Consent and DOJ Consent, and, if applicable, HSR Clearance. 6.4. Qualification. Buyer is legally, financially and otherwise qualified to be the licensee of, acquire, own and operate the Stations under the Communications Act of 1934, as amended (the "Communications Act") and the rules, regulations and policies of the FCC. There are no facts that would, under existing law and the existing rules, regulations, policies and procedures of the FCC, disqualify Buyer as an assignee of the FCC Licenses or as the owner and operator of the Stations. No waiver of any FCC rule or policy is necessary for the FCC Consent to be obtained. There is no action, suit or proceeding pending or threatened against Buyer which questions the legality or propriety of the transactions contemplated by this -6- Agreement or could materially adversely affect Buyer's ability to perform its obligations hereunder. Buyer has and will have available on the Closing Date sufficient funds to enable it to consummate the transactions contemplated hereby. 6.5. No Finder. No broker, finder or other person is entitled to a commission, brokerage fee or other similar payment in connection with this Agreement or the transactions contemplated hereby as a result of any agreement or action of Buyer or any party acting on Buyer's behalf, except Seratin Bros., Inc., whose fee will be paid by Buyer. ARTICLE 7: REPRESENTATIONS AND WARRANTIES OF SELLER ---------------------------------------- Seller makes the following representations and warranties to Buyer: 7.1. Organization. Seller is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, and is qualified to do business in each jurisdiction in which the Station Assets are located. Seller has the requisite power and authority to execute and deliver this Agreement and all of the other agreements and instruments to be executed and delivered by Seller pursuant hereto (collectively, the "Seller Ancillary Agreements"), to consummate the transactions contemplated hereby and thereby and to comply with the terms, conditions and provisions hereof and thereof. 7.2. Authorization. The execution, delivery and performance of this Agreement and the Seller Ancillary Agreements by Seller have been duly authorized and approved by all necessary action of Seller and do not require any further authorization or consent of Seller. This Agreement is, and each Seller Ancillary Agreement when executed and delivered by Seller and the other parties thereto will be, a legal, valid and binding agreement of Seller enforceable in accordance with its respective terms, except in each case as such enforceability may be limited by bankruptcy, moratorium, insolvency, reorganization or other similar laws affecting or limiting the enforcement of creditors' rights generally and except as such enforceability is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 7.3. No Conflicts. Neither the execution and delivery by Seller of this Agreement and the Seller Ancillary Agreements or the consummation by Seller of any of the transactions contemplated hereby or thereby nor compliance by Seller with or fulfillment by Seller of the terms, conditions and provisions hereof or thereof will: (i) conflict with any organizational documents of Seller or any law, judgment, order, or decree to which Seller is subject or, except as set forth on Schedule 1.1(c), any Station Contract; or (ii) require the approval, consent, authorization or act of, or the making by Seller of any declaration, filing or registration with, any third party or any foreign, federal, state or local court, governmental or regulatory authority or body, except the FCC Consent and DOJ Consent and, if applicable, HSR Clearance. -7- 7.4. FCC Licenses. Seller (or one of the companies comprising Seller) is the holder of the FCC Licenses described on Schedule 1.1(a). The FCC Licenses are in full force and effect and have not been revoked, suspended, canceled, rescinded or terminated and have not expired. There is not pending any action by or before the FCC to revoke, suspend, cancel, rescind or materially adversely modify any of the FCC Licenses (other than proceedings to amend FCC rules of general applicability), and there is not now issued or outstanding, by or before the FCC, any order to show cause, notice of violation, notice of apparent liability, or notice of forfeiture against Seller with respect to the Stations. The Stations are operating in compliance in all material respects with the FCC Licenses, the Communications Act, and the rules, regulations and policies of the FCC. 7.5. Taxes. Seller has, in respect of the Stations' business, filed all foreign, federal, state, county and local income, excise, property, sales, use, franchise and other tax returns and reports which are required to have been filed by it under applicable law and has paid all taxes which have become due pursuant to such returns or pursuant to any assessments which have become payable. 7.6. Personal Property. Schedule 1.1(b) contains a list of all material items of Tangible Personal Property included in the Station Assets. Seller has title to the Tangible Personal Property free and clear of Liens other than Permitted Liens. 7.7. Real Property. Schedule 1.1(f) contains a description of all Real Property included in the Station Assets. Seller has fee simple title to the owned Real Property ("Owned Real Property") free and clear of Liens other than Permitted Liens. Schedule 1.1(f) includes a description of each lease of Real Property or similar agreement included in the Station Assets (the "Real Property Leases"). The Owned Real Property includes, and the Real Property Leases provide, access to the Stations' facilities. To Seller's knowledge, the Real Property is not subject to any suit for condemnation or other taking by any public authority. 7.8. Contracts. Each of the Station Contracts (including without limitation each of the Real Property Leases) is in effect and is binding upon Seller and, to Seller's knowledge, the other parties thereto (subject to bankruptcy, insolvency, reorganization or other similar laws relating to or affecting the enforcement of creditors' rights generally). Seller has performed its obligations under each of the Station Contracts in all material respects, and is not in material default thereunder, and to Seller's knowledge, no other party to any of the Station Contracts is in default thereunder in any material respect. 7.9. Environmental. Except as set forth in any environmental report delivered by Seller to Buyer prior to the date of this Agreement and except as set forth on Schedule 1.1(f), to Seller's knowledge, no hazardous or toxic substance or waste regulated under any applicable environmental, health or safety law has been generated, stored, transported or released on, in, from or to the Real Property included in the Station Assets. Except as set forth in any environmental report delivered by Seller to Buyer prior to the date of this Agreement and except as set forth on Schedule 1.1(f), to Seller's knowledge, Seller has -8- complied in all material respects with all environmental, health and safety laws applicable to the Stations. 7.10. Intangible Property. Schedule 1.1(d) contains a description of the material Intangible Property included in the Station Assets. Except as set forth on Schedule 1.1(d), Seller has received no notice of any claim that its use of the Intangible Property infringes upon any third party rights. Except as set forth on Schedule 1.1(d), Seller owns or has the right to use the Intangible Property free and clear of Liens other than Permitted Liens. 7.11. Compliance with Law. Seller has complied in all material respects with all laws, regulations, rules, writs, injunctions, ordinances, franchises, decrees or orders of any court or of any foreign, federal, state, municipal or other governmental authority which are applicable to the operation of the Stations. There is no action, suit or proceeding pending or threatened against Seller in respect of the Stations that will subject Buyer to liability or which questions the legality or propriety of the transactions contemplated by this Agreement. To Seller's knowledge, there are no governmental claims or investigations pending or threatened against Seller in respect of the Stations (except those affecting the industry generally). 7.12. No Finder. No broker, finder or other person is entitled to a commission, brokerage fee or other similar payment in connection with this Agreement or the transactions contemplated hereby as a result of any agreement or action of Seller or any party acting on Seller's behalf. ARTICLE 8: ACCOUNTS RECEIVABLE - ------------------------------ 8.1. Accounts Receivable. All accounts receivable arising prior to the Closing Date in connection with the operation of the Stations, including but not limited to accounts receivable for advertising revenues for programs and announcements performed prior to the Closing Date and other broadcast revenues for services performed prior to the Closing Date, shall remain the property of Seller (the "Accounts Receivable") and Buyer shall not acquire any right or interest therein. For a period of six months from Closing (the "Collection Period"), Buyer shall collect the Accounts Receivable in the normal and ordinary course of Buyer's business and shall apply all such amounts collected to the debtor's oldest account receivable first. Buyer's obligation shall not extend to the institution of litigation, employment of counsel or a collection agency or any other extraordinary means of collection. During the Collection Period, neither Seller or its agents shall make any direct solicitation of any such account debtor for collection purposes or institute litigation for the collection of amounts due. Any amounts relating to the Accounts Receivable that are paid directly to Seller shall be retained by Seller. Within ten calendar days after the end of each month, Buyer shall make a payment to Seller equal to the amount of all collections of Accounts Receivable during the preceding month. At the end of the Collection Period, any remaining Accounts Receivable shall be returned to Seller for collection. -9- ARTICLE 9: COVENANTS OF SELLER ------------------- 9.1. Seller's Covenants. Seller covenants and agrees with respect to the Stations that, between the date hereof and Closing, except as permitted by this Agreement or with the prior written consent of Buyer, which shall not be unreasonably withheld, Seller shall: (a) operate the Stations in the ordinary course of business consistent with past practice and in all material respects in accordance with FCC rules and regulations and with all other applicable laws, regulations, rules and orders; (b) not, other than in the ordinary course of business in accordance with past practice, sell, lease or dispose of or agree to sell, lease or dispose of any of the Station Assets, or create, assume or permit to exist any Liens upon the Station Assets, except for Permitted Liens; (c) furnish Buyer with such information relating to the Station Assets as Buyer may reasonably request, at Buyer's expense and provided such request does not interfere unreasonably with the business of the Stations; (d) after Seller publicly announces the transaction contemplated by this Agreement and files this Agreement with the FCC, then, when reasonably requested by Buyer, provide Buyer access to the Station facilities that are included in the Station Assets during the Stations' normal business hours, provided such access does not interfere unreasonably with the business of the Stations; and (e) make available to Buyer, and authorize its accountants to cooperate and make available to Buyer, at Buyer's expense and reasonable request such financial information regarding the Stations as is maintained by Seller on a basis not consolidated with other stations. ARTICLE 10: JOINT COVENANTS --------------- Buyer and Seller hereby covenant and agree that between the date hereof and Closing: 10.1. Cooperation. Subject to express limitations contained elsewhere herein, each party (i) shall cooperate fully with one another in taking any reasonable actions (including without limitation, reasonable actions to obtain the required consent of any governmental instrumentality or any third party) necessary or helpful to accomplish the transactions contemplated by this Agreement, including but not limited to the prompt satisfaction of any condition to Closing set forth herein, and (ii) shall not take any action that conflicts with its obligations hereunder or that causes its representations and warranties to become untrue in any material respect. 10.2. Control of Stations. Buyer shall not, directly or indirectly, control, supervise or direct the operations of the Stations prior to Closing. Such operations, including complete -10- control and supervision of all Station programs, employees and policies, shall be the sole responsibility of Seller. 10.3. Consents to Assignment. The parties shall use commercially reasonable efforts to obtain any third party consents necessary for the assignment of any Station Contract (which shall not require any payment to any such third party). To the extent that any Station Contract may not be assigned without the consent of any third party, and such consent is not obtained prior to Closing, this Agreement and any assignment executed pursuant hereto shall not constitute an assignment thereof, but to the extent permitted by law shall constitute an equitable assignment by Seller and assumption by Buyer of Seller's rights and obligations under the applicable Station Contract, with Seller making available to Buyer the benefits thereof and Buyer performing the obligations thereunder on Seller's behalf. 10.4. Employee Matters. (a) Prior to Closing, Seller shall deliver to Buyer a list of employees of the Stations that Seller does not intend to retain after Closing. Buyer may interview and elect to hire such listed employees, but not any other employees of Seller. Buyer is obligated to hire only those employees that are under employment contracts (and assume Seller's obligations and liabilities under such employment contracts) which are included in the Station Contracts. With respect to employees hired by Buyer ("Transferred Employees"), to the extent permitted by law Seller shall provide Buyer access to its personnel records and such other information as Buyer may reasonably request prior to Closing. With respect to such hired employees, Seller shall be responsible for the payment of all compensation and accrued employee benefits payable by it until Closing and thereafter Buyer shall be responsible for all such obligations payable by it. Buyer shall cause all employees it hires to be eligible to participate in its "employee welfare benefit plans" and "employee pension benefit plans" (as defined in Section 3(l) and 3(2) of ERISA, respectively) in which similarly situated employees are generally eligible to participate; provided, however, that all such employees and their spouses and dependents shall be eligible for coverage immediately after Closing (and shall not be excluded from coverage on account of any pre-existing condition) to the extent provided under such plans. For purposes of any length of service requirements, waiting periods, vesting periods or differential benefits based on length of service in any such plan for which such employees may be eligible after Closing, Buyer shall ensure that service with Seller shall be deemed to have been service with the Buyer. In addition, Buyer shall ensure that each such employee receives credit under any welfare benefit plan of Buyer for any deductibles or co- payments paid by such employees and dependents for the current plan year under a plan maintained by Seller. Notwithstanding any other provision contained herein, Buyer shall grant credit to each such employee for all unused sick leave accrued as of Closing as an employee of Seller. Notwithstanding any other provision contained herein, Buyer shall assume and discharge Seller's liabilities for the payment of all unused vacation leave accrued by such employees as of Closing. (b) As soon as administratively feasible following the execution of a closing agreement with the Internal Revenue Service relating to the tax- qualified status of Seller's -11- 401(k) Plan (the "Savings Plan") and the issuance of a favorable determination letter as to the tax-qualified status of the Savings Plan under Section 401(a) of the Code (or an opinion of counsel that the form of the Savings Plan is so qualified), Buyer and Seller shall enter into a 401(k) plan asset transfer agreement pursuant to which Buyer shall establish a defined contribution plan (or cover Transferred Employees under an existing defined contribution plan sponsored by Buyer) for the benefit of Transferred Employees who were participants in the Savings Plan. Such Transferred Employees are referred to hereinafter as the "Savings Plan Employees." (c) Following execution of the agreement contemplated in clause (b) above, Seller shall cause to be transferred from the Savings Plan to the plan covering the Savings Plan Employees (the "Transferee Savings Plan") the liability for the account balances of the Savings Plan Employees (including outstanding loan balances of Savings Plan Employees), together with cash, cash equivalents or other mutually acceptable property, the value of which on such transfer date is equal to such liability, and Buyer shall cause the Transferee Savings Plan to accept such transfer, all in accordance with the rules and regulations under Section 414(l) of the Code. (d) Pending completion of the transfers described in this Section, Seller and Buyer shall make arrangements for any distributions, if any, to the Savings Plan Employees from the Savings Plan. Seller and Buyer shall provide each other with access to information reasonably necessary in order to carry out the provisions of this paragraph. In addition, until the asset transfer is effectuated, Buyer shall cooperate with the reasonable requests of Seller to continue to withhold from the pay checks of Transferred Employees' who have outstanding loan balances in the Seller's 401(k) Savings Plan and Buyer shall remit such withheld amounts to the Seller in a timely fashion such that the outstanding loans do not go into default. 10.5. 1031 Exchange. At or prior to Closing, Seller may assign its rights under this Agreement (in whole or in part) to a qualified intermediary (as defined in Treasury regulation section 1.1031(k)-1(g)(4)) or similar entity or arrangement ("Qualified Intermediary"). Upon any such assignment, Seller shall promptly give written notice thereof to Buyer, and Buyer shall cooperate with the reasonable requests of Seller and any Qualified Intermediary in connection therewith. Without limiting the generality of the foregoing, if Seller gives notice of such assignment, Buyer shall (i) promptly provide Seller with written acknowledgment of such notice and (ii) at Closing, pay the Purchase Price (or any portion thereof designated by the Qualified Intermediary) to or on behalf of the Qualified Intermediary (which payment shall, to the extent thereof, satisfy the obligations of Buyer to make such payment hereunder). Seller's assignment to a Qualified Intermediary will not relieve Seller of any of its duties or obligations herein. Except for the obligations of Buyer set forth in this Section, Buyer shall not have any liability or obligation to Seller for the failure of the contemplated exchange to qualify as a like-kind exchange under Section 1031 of the Internal Revenue Code unless such failure is the result of the material breach or default by Buyer under this Agreement. 10.6. Trust. Notwithstanding anything in this Agreement to the contrary, Seller may at its option assign this Agreement (in whole or part) and assign and transfer the Station Assets -12- (in whole or in part) to a trustee to hold and operate pursuant to a trust agreement, provided such trustee assumes Seller's duties and obligations hereunder with respect to the Station Assets held in such trust. ARTICLE 11: CONDITIONS OF CLOSING BY BUYER ------------------------------ The obligations of Buyer hereunder are, at its option, subject to satisfaction, at or prior to Closing, of each of the following conditions: 11.1. Representations, Warranties and Covenants. The representations and warranties of Seller made in this Agreement shall be true and correct in all material respects as of the Closing Date except for changes permitted or contemplated by the terms of this Agreement, and the covenants and agreements to be complied with and performed by Seller at or prior to Closing shall have been complied with or performed in all material respects. Buyer shall have received a certificate dated as of the Closing Date from Seller, executed by an authorized officer of Seller to the effect that the conditions set forth in this Section have been satisfied. 11.2. Governmental Consents. The FCC Consent and DOJ Consent, and, if applicable, HSR Clearance, shall have been obtained, and no court or governmental order prohibiting Closing shall be in effect. ARTICLE 12: CONDITIONS OF CLOSING BY SELLER ------------------------------- The obligations of Seller hereunder are, at its option, subject to satisfaction, at or prior to Closing, of each of the following conditions: 12.1. Representations, Warranties and Covenants. The representations and warranties of Buyer made in this Agreement shall be true and correct in all material respects as of the Closing Date except for changes permitted or contemplated by the terms of this Agreement, and the covenants and agreements to be complied with and performed by Buyer at or prior to Closing shall have been complied with or performed in all material respects. Seller shall have received a certificate dated as of the Closing Date from Buyer, executed by an authorized officer of Buyer, to the effect that the conditions set forth in this Section have been satisfied. 12.2. Governmental Consents. The FCC Consent and DOJ Consent, and, if applicable, HSR Clearance, shall have been obtained, and no court or governmental order prohibiting Closing shall be in effect. 12.3. AMFM Closing. The closing under the AMFM Agreement shall have been consummated. ARTICLE 13: EXPENSES -------- 13.1. Expenses. Each party shall be solely responsible for all costs and expenses incurred by it in connection with the negotiation, preparation and performance of and -13- compliance with the terms of this Agreement, except that (i) all recordation, transfer and documentary taxes, fees and charges, and any excise, sales or use taxes, applicable to the transfer of the Station Assets shall be paid by Buyer, (ii) all FCC filing fees shall be paid equally by Buyer and Seller, and (iii) all HSR Act filing fees and expenses shall be paid by Buyer. ARTICLE 14: DOCUMENTS TO BE DELIVERED AT CLOSING ------------------------------------ 14.1. Seller's Documents. At Closing, Seller shall deliver or cause to be delivered to Buyer: (i) certified copies of resolutions authorizing its execution, delivery and performance of this Agreement, including the consummation of the transactions contemplated hereby; (ii) the certificate described in Section 11.1; and (iii) such bills of sale, assignments, special warranty deeds, documents of title and other instruments of conveyance, assignment and transfer as may be necessary to convey, transfer and assign the Station Assets to Buyer, free and clear of Liens, except for Permitted Liens. 14.2. Buyer's Documents. At Closing, Buyer shall deliver or cause to be delivered to Seller: (i) the certified copies of resolutions authorizing its execution, delivery and performance of this Agreement, including the consummation of the transactions contemplated hereby; (ii) the certificate described in Section 12.1; and (iii) such documents and instruments of assumption as may be necessary to assume the Assumed Obligations, and the Purchase Price in accordance with Section 3.1 hereof. ARTICLE 15: SURVIVAL; INDEMNIFICATION. -------------------------- 15.1. Survival. The covenants, agreements, representations and warranties in this Agreement shall survive Closing for a period of six (6) months from the Closing Date whereupon they shall expire and be of no further force or effect, except those under (i) this Article 15 that relate to Damages (defined below) for which written notice is given by the indemnified party to the indemnifying party prior to the expiration, which shall survive until resolved and (ii) Sections 2.1 (Assumed Obligations), 3.3 (Adjustments), 3.4 (Allocation), 8.1 (Accounts Receivable) and 13.1 (Expenses), and indemnification obligations with respect to such provisions, which shall survive until performed. -14- 15.2. Indemnification. (a) From and after the Closing, Seller shall defend, indemnify and hold harmless Buyer from and against any and all losses, costs, damages, liabilities and expenses, including reasonable attorneys' fees and expenses ("Damages") incurred by Buyer arising out of or resulting from: (i) any breach or default by Seller under this Agreement; (ii) the Retained Obligations; or (iii) the business or operation of the Stations before Closing; provided, however, that (i) Seller shall have no liability to Buyer hereunder until, and only to the extent that, Buyer's aggregate Damages exceed $500,000 and (ii) the maximum liability of Seller hereunder shall be $1,000,000. (b) From and after the Closing, Buyer shall defend, indemnify and hold harmless Seller from and against any and all Damages incurred by Seller arising out of or resulting from: (i) any breach or default by Buyer under this Agreement; (ii) the Assumed Obligations; or (iii) the business or operation of the Stations after Closing. 15.3. Procedures. The indemnified party shall give prompt written notice to the indemnifying party of any demand, suit, claim or assertion of liability by third parties or other circumstances that could give rise to an indemnification obligation hereunder against the indemnifying party (a "Claim"), but a failure to give such notice or delaying such notice shall not affect the indemnified party's right to indemnification and the indemnifying party's obligation to indemnify as set forth in this Agreement, except to the extent the indemnifying party's ability to remedy, contest, defend or settle with respect to such Claim is thereby prejudiced. The obligations and liabilities of the parties with respect to any Claim shall be subject to the following additional terms and conditions: (a) The indemnifying party shall have the right to undertake, by counsel or other representatives of its own choosing, the defense or opposition to such Claim. (b) In the event that the indemnifying party shall elect not to undertake such defense or opposition, or, within twenty (20) days after written notice (which shall include sufficient description of background information explaining the basis for such Claim) of any such Claim from the indemnified party, the indemnifying party shall fail to undertake to defend or oppose, the indemnified party (upon further written notice to the indemnifying party) shall have the right to undertake the defense, opposition, compromise or settlement of such Claim, by counsel or other representatives of its own choosing, on behalf of and for the account and risk of the indemnifying party (subject to the right of the indemnifying party to assume defense of or opposition to such Claim at any time prior to settlement, compromise or final determination thereof). (c) Anything herein to the contrary notwithstanding: (i) the indemnified party shall have the right, at its own cost and expense, to participate in the defense, opposition, compromise or settlement of the Claim; (ii) the indemnifying party shall not, without the indemnified party's written consent, settle or compromise any Claim or consent to entry of any judgment which does not include as an unconditional term thereof the giving by -15- the claimant or the plaintiff to the indemnified party of a release from all liability in respect of such Claim; and (iii) in the event that the indemnifying party undertakes defense of or opposition to any Claim, the indemnified party, by counsel or other representative of its own choosing and at its sole cost and expense, shall have the right to consult with the indemnifying party and its counsel or other representatives concerning such Claim and the indemnifying party and the indemnified party and their respective counsel or other representatives shall cooperate in good faith with respect to such Claim. (d) All claims not disputed shall be paid by the indemnifying party within thirty (30) days after receiving notice of the Claim. "Disputed Claims" shall mean claims for Damages by an indemnified party which the indemnifying party objects to in writing within thirty (30) days after receiving notice of the Claim. In the event there is a Disputed Claim with respect to any Damages, the indemnifying party shall be required to pay the indemnified party the amount of such Damages for which the indemnifying party has, pursuant to a final determination, been found liable within ten (10) days after there is a final determination with respect to such Disputed Claim. A final determination of a Disputed Claim shall be (i) a judgment of any court determining the validity of a Disputed Claim, if no appeal is pending from such judgment and if the time to appeal therefrom has elapsed; (ii) an award of any arbitration determining the validity of such disputed claim, if there is not pending any motion to set aside such award and if the time within which to move to set aside such award has elapsed; (iii) a written termination of the dispute with respect to such claim signed by the parties thereto or their attorneys; (iv) a written acknowledgment of the indemnifying party that it no longer disputes the validity of such claim; or (v) such other evidence of final determination of a disputed claim as shall be acceptable to the parties. No undertaking of defense or opposition to a Claim shall be construed as an acknowledgment by such party that it is liable to the party claiming indemnification with respect to the Claim at issue or other similar Claims. ARTICLE 16: TERMINATION ----------- 16.1. Termination. This Agreement may be terminated at any time prior to Closing as follows: (a) by mutual written consent of Buyer and Seller; (b) by written notice of Buyer to Seller if Seller (i) does not satisfy the conditions or perform the obligations to be satisfied or performed by it on the Closing Date; or (ii) otherwise breaches in any material respect any of its representations or warranties or defaults in any material respect in the performance of any of its covenants or agreements herein contained and such breach or default is not cured within the Cure Period (defined below); (c) by written notice of Seller to Buyer if Buyer (i) does not satisfy the conditions or perform the obligations to be satisfied or performed by it on the Closing Date; or (ii) otherwise breaches in any material respect any of its representations or warranties or defaults in any material respect in the performance of any of its covenants or agreements -16- herein contained and such breach or default is not cured within the Cure Period (defined below); (d) by written notice of Buyer to Seller, or by Seller to Buyer, if the FCC denies the FCC Application; (e) by written notice of Seller to Buyer if the Closing shall not have been consummated on or before the date four months after the date of this Agreement; or (f) by written notice of Seller to Buyer if the AMFM Agreement is terminated or expires. The term "Cure Period" as used herein means a period commencing the date Buyer or Seller receives from the other written notice of breach or default hereunder and continuing until the earlier of (i) thirty (30) days thereafter or (ii) the Closing Date; provided, however, that if the breach or default cannot reasonably be cured within such period but can be cured before the Closing Date, and if diligent efforts to cure promptly commence, then the Cure Period shall continue as long as such diligent efforts to cure continue, but not beyond the Closing Date. Except as set forth below, the termination of this Agreement shall not relieve any party of any liability for breach or default under this Agreement prior to the date of termination. Notwithstanding anything contained herein to the contrary, Section 13.1 shall survive any termination of this Agreement. 16.2. Remedies. The parties recognize that if either party refuses to consummate the Closing pursuant to the provisions of this Agreement or either party otherwise breaches or defaults such that the Closing has not occurred ("Breaching Party"), monetary damages alone will not be adequate to compensate the non-breaching party ("Non-Breaching Party") for its injury. Such Non- Breaching Party shall therefore be entitled to obtain specific performance of the terms of this Agreement in lieu of, and not in addition to, any other remedies, including but not limited to monetary damages, that may be available to it; provided however, that Seller may elect to recover liquidated damages in lieu of obtaining specific performance. If any action is brought by the Non- Breaching Party to enforce this Agreement, the Breaching Party shall waive the defense that there is an adequate remedy at law. In the event of a default by the Breaching Party which results in the filing of a lawsuit for damages, specific performance, or other remedy, the Non-Breaching Party shall be entitled to reimbursement by the Breaching Party of reasonable legal fees and expenses incurred by the Non-Breaching Party, provided that the Non-Breaching Party is successful in such lawsuit. 16.3. Liquidated Damages. If Seller terminates this Agreement due to Buyer's failure to consummate the Closing on the Closing Date or if this Agreement is otherwise terminated by Seller pursuant to Section 16.1(c), then Buyer shall pay Seller as liquidated damages an amount equal to 25% of the Purchase Price. It is understood and agreed that such liquidated damages amount represents Buyer's and Seller's reasonable estimate of actual damages and does not constitute a penalty and shall, if elected by and paid to Seller, be Seller's sole and exclusive remedy hereunder. -17- ARTICLE 17: MISCELLANEOUS PROVISIONS ------------------------ 17.1. Casualty Loss. In the event any loss or damage of the Station Assets exists on the Closing Date, Buyer and Seller shall consummate the Closing and Seller shall assign to Buyer the proceeds of any insurance payable to Seller on account of such damage or loss. 17.2. Further Assurances. After the Closing, Seller shall from time to time, at the request of and without further cost or expense to Buyer, execute and deliver such other instruments of conveyance and transfer and take such other actions as may reasonably be requested in order to more effectively consummate the transactions contemplated hereby to vest in Buyer good title to the Station Assets, and Buyer shall from time to time, at the request of and without further cost or expense to Seller, execute and deliver such other instruments and take such other actions as may reasonably be requested in order more effectively to relieve Seller of any obligations being assumed by Buyer hereunder. 17.3. Assignment. Except as set forth in Sections 10.5 (1031 Exchange) and 10.6 (Trust), neither party may assign this Agreement without the prior written consent of the other party hereto. With respect to any permitted assignment, the parties shall take all such actions as are reasonably necessary to effectuate such assignment, including but not limited to cooperating in any appropriate filings with the FCC or other governmental authorities. All covenants, agreements, statements, representations, warranties and indemnities in this Agreement by and on behalf of any of the parties hereto shall bind and inure to the benefit of their respective successors and permitted assigns of the parties hereto. 17.4. Amendments. No amendment, waiver of compliance with any provision or condition hereof or consent pursuant to this Agreement shall be effective unless evidenced by an instrument in writing signed by the party against whom enforcement of any waiver, amendment, change, extension or discharge is sought. 17.5. Headings. The headings set forth in this Agreement are for convenience only and will not control or affect the meaning or construction of the provisions of this Agreement. 17.6. Governing Law. The construction and performance of this Agreement shall be governed by the laws of the State of Texas without giving effect to the choice of law provisions thereof. 17.7. Notices. Any notice, demand or request required or permitted to be given under the provisions of this Agreement shall be in writing, including by facsimile, and shall be deemed to have been received on the date of personal delivery, on the third day after deposit in the U.S. mail if mailed by registered or certified mail, postage prepaid and return receipt requested, on the day after delivery to a nationally recognized overnight courier service if sent by an overnight delivery service for next morning delivery or when delivered by facsimile transmission, and shall be addressed as follows (or to such other address as any party may request by written notice): -18- if to Seller: c/o Clear Channel Broadcasting, Inc. 200 Concord Plaza, Suite 600 San Antonio, Texas 78216 Attention: President Facsimile: (210) 822-2299 with a copy (which shall not constitute notice) to: Wiley, Rein & Fielding 1776 K Street, N.W. Washington, D.C. 20006 Attention: Richard J. Bodorff, Esq. Facsimile: (202) 719-7049 if to Buyer: Nassau Broadcasting Partners, L.P. 619 Alexander Road, Third Floor Princeton, New Jersey 08540 Attention: Louis F. Mercatanti, Jr. Facsimile: (609) 924-1584 with a copy (which shall not constitute notice) to: Sterns and Weinroth 50 West State Street P.O. Box 1298 Trenton, New Jersey 08607-1298 Attention: Mark Schorr, Esq. Facsimile: (609) 392-7956 17.8. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original and all of which together will constitute one and the same instrument. 17.9. No Third Party Beneficiaries. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity other than the parties hereto and their successors or permitted assigns, any rights or remedies under or by reason of this Agreement. 17.10. Severability. The parties agree that if one or more provisions contained in this Agreement shall be deemed or held to be invalid, illegal or unenforceable in any respect under any applicable law, this Agreement shall be construed with the invalid, illegal or unenforceable provision deleted, and the validity, legality and enforceability of the remaining provisions contained herein shall not be affected or impaired thereby. 17.11. Entire Agreement. This Agreement embodies the entire agreement and understanding of the parties hereto and supersedes any and all prior agreements, arrangements -19- and understandings relating to the matters provided for herein. This Agreement does not supersede any confidentiality agreement relating to the Stations. [SIGNATURE PAGE FOLLOWS] -20- SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT ------------------------------------------ IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above. SELLER: CLEAR CHANNEL BROADCASTING, INC. CLEAR CHANNEL BROADCASTING LICENSES, INC. By: /s/ Mark P. Mays ----------------------------------- Name: Mark P. Mays Title: President BUYER: NASSAU BROADCASTING PARTNERS, L.P. By: Nassau Broadcasting Partners, Inc., its general partner By: ----------------------------------- Name: Title: SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT ------------------------------------------ IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above. SELLER: CLEAR CHANNEL BROADCASTING, INC. CLEAR CHANNEL BROADCASTING LICENSES, INC. By: ------------------------------------- Name: Title: BUYER: NASSAU BROADCASTING PARTNERS, L.P. By: Nassau Broadcasting Partners, Inc., its general partner By: /s/ Louis F. Meuethas -------------------------------------- Name: Louis F. Meuethas Title: President EX-2.4 5 0005.txt STOCK PURCHASE AGMT DTD 7/1/1996 Exhibit 2.4 STOCK PURCHASE AGREEMENT ------------------------ THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of July 1, 1996, between NASSAU BROADCASTING PARTNERS, L.P., a Delaware limited partnership, with an address at 600 Alexander Road, Building Two, Princeton, New Jersey 08540 ("Purchaser"), and Joseph E. Buckelew, an individual with an address at 120 Adelaide Place, Lakewood, New Jersey; Jean M. Kvistad, an individual with an address at 1800 So. Ocean Boulevard, Apt. 9F, Boca Raton, Florida; Steven V. Lane, an individual with an address at 5380 N. Ocean, Sugar Island, Florida; Edward Levy, an individual with an address at 1220 Georgian Terrace, Lakewood, New Jersey; and Roy G. Simmons, an individual with an address at 511 Clinton Avenue, Toms River, New Jersey (collectively, "Sellers"). STATEMENT OF FACTS ------------------ 1. Sellers are the sole owners of all of the issued and outstanding shares of the capital stock (the "Shares") of North Shore Broadcasting Corp., a New Jersey corporation ("North Shore"), and Seashore Broadcasting Corp., a New Jersey corporation ("Seashore," together with North Shore, the "Companies"), as follows: Shares Shares North Shore Seashore ----------- -------- Buckelew 3 20 Kvistad 3 20 Lane 3 20 Levy 3 20 Simmons 3 20 -- -- TOTAL 15 100 2. The Companies are the licensees and operators of radio stations WOBM-AM, licensed to Lakewood, New Jersey, and WOBM-FM, licensed to Toms River, New Jersey (the "Stations"). 3. Simultaneously with the execution of this Agreement, the Companies and Purchaser have entered into a Time Brokerage Agreement, attached hereto as Exhibit A (the "TBA"), pursuant to which Purchaser will provide over the air - --------- program services using the facilities of the Stations, commencing July 1, 1996, on the terms. and conditions contained therein. WHEREAS, subject to the consent of the Federal Communications Commission (the "FCC"), Sellers desire to sell the Shares to Purchaser, and Purchaser desires to purchase the Shares from Sellers, all on the terms and conditions herein contained. 1 NOW THEREFORE, in consideration of the promises, mutual covenants and agreements contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. PURCHASE AND SALE OF STOCK. --------------------------- On the Closing Date (as hereinafter defined) subject to the terms and conditions of this Agreement, Sellers shall sell to Purchaser, and Purchaser shall purchase from Sellers, all right, title and interest, legal or equitable, in and to all of the Shares. 2. PURCHASE PRICE AND PAYMENT -------------------------- (a) Purchase Price. In full consideration of the sale of the Shares by -------------- Sellers to Purchaser, Purchaser shall pay to Sellers the sum of TWENTY-ONE M1LLION DOLLARS ($21,000,000) (the "Purchase Price"), subject to adjustment in accordance with 2(c)(ii) and (iii). Sellers acknowledge and agree that Purchaser shall pay all amounts due to Sellers hereunder as directed by the Sellers. Purchaser shall have no liability whatsoever to the Sellers individually for the failure of any of Sellers to distribute amounts paid by Purchaser to the other Sellers. (b) Method of Payment of Purchase Price. The Purchase Price shall be ----------------------------------- paid as follows: (i) Contract Deposit. Upon execution of this Agreement, Purchaser ---------------- shall deliver to Sellers one or more certified or cashier's checks or wire transfers payable as directed by Sellers in the aggregate amount of Two Million Dollars ($2,000,000) (the "Contract Deposit"). (ii) Fixed Stow Payments. Purchaser shall pay Fixed Stow Payments to ------------------- Sellers as set forth below: (1) $83,333.33 per month from July 1, 1996 until June 30, 1997; (2) $91,667.67 per month from July 1, 1997 until June 30, 1998; (3) $100,000 per month from July 1, 1998 until June 30, 1999; and (4) $108,333.33 per month from July 1, 1999 until June 30, 2000. These payments shall be referred to collectively as "The Fixed Stow Payments" and shall be made by Purchaser pursuant to the terms of this Agreement. One-half of the Fixed Stow Payments shall be paid on the fifteenth (15th) of every month and one-half of the Fixed 2 Stow Payments by the thirtieth (30th) of each month, with the first Fixed Stow Payment to be made on July 15,1996. In the event that the Fixed Stow Payments are not paid by Purchaser on the due date as set forth in this section, and within sixty (60) days after written notice is provided to Purchaser specifying the event of default that if not cured would constitute an event of default and specifying the actions necessary to cure within such period, the Sellers may declare a default pursuant to Section 11(b) of this Agreement. (iii) Balance. On the Closing Date (as hereinafter defined), ------- Purchaser shall deliver to Sellers one or more certified or cashier's checks or wire transfers payable as directed by Sellers in the aggregate amount of Fourteen Million Dollars ($14,000,000). (iv) Additional Amounts. At the closing, in addition to the ------------------ amounts set forth in Subsections 2(b)(i), (ii) and (iii), Purchaser shall pay to Sellers: (1) Four Hundred Thousand Dollars ($400,000), if the date of closing is July 1, 2000 or during the extension of time as set forth in Section 6(c); (2) Four Hundred Fifty Thousand Dollars ($450,000) minus Four ----- Thousand One Hundred Sixty-Six Dollars ($4,166) for each full calendar month after July, 1999 up to the date of closing if the Purchaser accelerates the date of closing so that it occurs between July 1, 1999 and June 30, 2000; or (3) Four Hundred Twenty Five Thousand Dollars ($425,000) plus ---- Four Thousand One Hundred Sixty-Seven Dollars ($4,167) for each full calendar month after January 1999 up to the date of closing if the Purchaser accelerates the date of closing so that it occurs between January 1, 1999 and June 30, 1999. In each case, the additional amount shall be payable to Sellers in one or more certified or cashier's checks or wire transfers payable as directed by Sellers. (c) Payments at Closing. ------------------- (i) Closing on Closing Date. In the event that the closing occurs ----------------------- on the Closing Date (as hereinafter defined), Purchaser shall deliver to Sellers one or more certified or cashier's checks or wire transfers payable as directed by Sellers in the aggregate amount of Fourteen Million Dollars ($14,000,000), and shall also pay the additional amount set forth in Section 2(b)(iv)(1) and shall pay all Fixed Stow Payments due, if any, under Section 2(b)(ii). (ii) Purchaser Accelerates Closing Date. In the event that the ---------------------------------- closing is accelerated by the Purchaser pursuant to Section 7(a) and occurs prior to July 1, 2000, the Purchaser shall pay the Fixed Stow Payments required to be paid up to the accelerated date of closing, the sum of Fourteen Million Dollars ($14,000,000) plus the additional amounts required by Section 2(b)(iv). Any Fixed Stow Payments which would otherwise have been due 3 for the period from the accelerated date of closing to July 1, 2000 shall not be required to be paid; and the purchase price of Twenty-One Million Dollars ($21,000,000) shall be reduced by the sum of such amounts not required to be paid. (iii) Sellers Accelerate Closing Date. In the event that the ------------------------------- closing is accelerated by the Seller pursuant to Section 7(a) and occurs prior to July 1, 2000, the Purchaser shall pay the Fixed Stow Payments required to be paid up to the accelerated date of the closing and the sum of Fourteen Million Dollars ($14,000,000). Purchaser shall not be required to pay any Fixed Stow Payments which would otherwise have been due for the period from the date of closing to July 1, 2000 and Purchaser shall not be required to pay any additional amounts as set forth in Section 2(b)(iv), and the Purchase Price of Twenty One Million Dollars ($21,000,000) shall be reduced by the sum of such amounts not required to be paid. 3. DELIVERY: FURTHER ASSURANCES. ---------------------------- (a) Upon execution of this Agreement, Sellers shall deliver: (i) All of the certificates representing the Shares to Bathgate, Wegener & Wolf (the "Escrow Agent") to be held by the Escrow Agent until the Closing (or upon termination of this Agreement) in accordance with the Escrow Agreement attached hereto as Exhibit B and (ii) Agreements Not to Compete in substantially the form --------- attached hereto as Exhibit C executed by each of Joseph E. Buckelew, Jean M. --------- Kvistad, Steven V. Lane, Edward Levy and Roy G. Simmons. (b) At the Closing, Sellers shall deliver to Purchaser: (i) Certificates representing the Shares, duly endorsed in blank, or in lieu thereof, having affixed thereto stock powers executed in blank, and in proper form for transfer; (ii) All property, assets, records, files, certificates and other documents, in Sellers' possession, custody or control relating to the Companies, the Stations and their business and affairs; (iii) Certificates of Good Standing for each of the Companies from the New Jersey Secretary of State; (iv) A certificate from Sellers stating that: (i) all representations and warranties of Sellers as set forth in this Agreement or in any statement, certificate, schedule, exhibit or other document delivered pursuant to this Agreement by Sellers are true and correct in all material respects, as of the Closing Date; and (ii) Sellers have, in all material respects, performed and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by Sellers at or prior to the Closing Date; 4 (v) An opinion of counsel for Sellers, in the form attached hereto as Exhibit D --------- (vi) An opinion of Sellers' FCC Counsel in the form attached hereto as Exhibit E --------- (vii) An assumption by Sellers of the mortgage held by Fleet, or evidence satisfactory to Purchaser that such mortgage has been paid in full. (viii) All other documents, agreements, certificates and consents required to be delivered to Purchaser under the provisions of this Agreement or reasonably requested by Purchaser to effect, evidence or facilitate the transactions contemplated by this Agreement. (c) At any time and from time to time after the Closing, at Purchaser's request and without further consideration, Sellers shall execute and deliver such other instruments of sale, transfer, conveyance, assignment and confirmation and take such further action as may be reasonably necessary or desirable in order to more effectively transfer, convey and assign to Purchaser, and to confirm Purchaser's title to, the Shares, and to put Purchaser in actual possession and operating control of the Companies. 4. REPRESENTATIONS AND WARRANTIES BY SELLERS. ----------------------------------------- As used in this Section 4, reference to Sellers' knowledge shall mean Sellers' knowledge after Sellers have exercised due diligence in making inquiries of the Companies' personnel. Sellers represent and warrant to Purchaser that the following statements as to Sellers, the Companies and/or the Stations are correct as of the date hereof and, where specifically indicated, will be correct at the Closing Date and all Schedules will be updated through the Closing Date: (a) Licenses, Authorization and Compliance Therewith. The Companies own ------------------------------------------------ and/or have all franchises, licenses, permits, consents, approvals or authorizations of any public or governmental agency materially necessary to the conduct by the Companies of their business as now conducted, including, but not limited to, all of the FCC authorizations issued to the Companies with respect to the Stations and their auxiliaries, including all rights in and to the call letters WOBM-AM and WOBM-FM (the "Licenses"), each as set forth on Schedule 4(a) ------------- attached hereto, without any material conflict with the rights of others, all of which are in full force and effect, except as set forth in Schedule 4(a), and ------------- subject to no lien, charge, encumbrance, or limitation. Without material exception, to the best of Sellers' knowledge, the Companies are in material compliance with all of their material obligations with respect thereto; and no event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any of the foregoing or would materially adversely affect the rights of the Companies thereunder. 5 Except as may be provided in Schedule 4(a), Sellers have no knowledge of ------------- any applications or any material complaints or proceedings pending or to the best of Sellers' knowledge threatened as of the date hereof before the FCC directly relating to the business or operation of the Stations other than proceedings which generally affect the broadcast industry. Further, on the Closing Date, except as set forth on Schedule 4(a), the Stations will, unless ------------- otherwise provided, be on the air operating at full licensed power (consistent with the FCC's Rules and Regulations, the Communications Act of 1934, as amended (the "Act"), and regulations promulgated thereunder) under their present licenses, not under any Special Temporary Authority as defined by the FCC. All FCC requirements for such authority will have been met, and there will be no material uncorrected FCC violations as to the Stations for conduct engaged in by the Companies. If notice of any such violation is received or if Sellers hereinafter become aware of any such violation prior to Closing, Sellers, at their own expense, shall eliminate and cause to be removed all such violations by the date of Closing; provided that the violations relate to conduct by the Companies. All returns, reports and statements required to be filed with the FCC or other governmental agency relating to the Stations have been or will be duly and timely filed, and all said reports, returns and statements are or will be complete and correct as filed. To Sellers' best knowledge, the "Public Inspection File" of the Stations will be complete and in full compliance with Section 73.3526 of the FCC's Rules and Regulations on the Closing Date. (b) Assets. Except as set forth on Schedule 4(b), the Companies are the ------ ------------- owners of, and will at the Closing Date have good title to, all of the business, rights, property and assets, real and personal, tangible and intangible, used or held for use in connection with the business and operation of the Stations (the "Assets"). No action is pending or, to the knowledge of Sellers, threatened, which would contest the Companies ownership of the Assets. The Assets will not at the Closing Date be subject to any contract, sale or other agreement, except as disclosed in writing to and expressly assumed or taken subject to by Purchaser hereunder. (c) Condition of Tangible Personal Property. Attached hereto as Schedule --------------------------------------- -------- 4(c) is a list of all equipment, electrical devices, antennas, cables, vehicles, - ---- furniture, fixtures, towers, office materials and supplies, hardware, tools, spare parts, records, tapes, discs, carts and other tangible personal property of every kind and description owned by the Companies and used or held for use (including those not in operating condition) in connection with the business and operations of the Stations on the date of this Agreement. Such equipment comprises all the equipment used or useful to operate the Stations as they are presently being operated and to the best of Sellers' knowledge said equipment is in material compliance with the FCC's Rules and Regulations. Up to the date hereof, and to the extent under the control of the Companies, until the Closing, the Stations and equipment have been and will be operated and maintained in accordance with good engineering practices and to the best of Sellers' knowledge in compliance with all of the FCC's Rules and Regulations. As of the date hereof, except as disclosed in Schedule 4(c), there are no material defects in ------------- any of the structures, improvements, electronic equipment or other tangible personal assets of the Companies, all of which are in operating condition. All of the Companies' buildings, structures, transmitters, towers, antennas, guy wires, ground systems, radials and other improvements are and as of the 6 Closing Date will be on property that will be included within the boundaries of the Real Property (as hereinafter defined). (d) Real Property. Attached hereto as Schedule 4(d) is a description ------------- ------------- of all of the real property owned by the Companies ("Fee Property") and all of the leases of real property leased by the Companies and used or held for use in connection with the business and operations of the Stations (the "Leased Property", with the Fee Property, the "Real Property"). As of the date hereof and at the Closing Date, with respect to the Fee Property except as set forth on Schedule 4(d): ------------- (i) There are no leases, rental agreements or other agreements relating to the Fee Property which are to remain in effect after Purchaser takes title to the Shares; and (ii) The Companies have not received any notice with respect to the Fee Property of any threatened rezoning, annexation or modification to general plan proceeding, which proceeding is still pending. (e) Contracts, Leases, Agreements, Etc. As of the date of this ---------------------------------- Agreement, to the best of Sellers' knowledge, each of the contracts, agreements, easements, licenses and leases (including leases for the Leased Property) (collectively, "Contracts"), to which the Companies are a party or to which they may be bound, are set forth on Schedule 4(e) attached ------------- hereto and are valid, binding and enforceable in accordance with their terms, and the Companies are not in any material respect in default thereunder, and except as set forth on Schedule 4(e), no consents are ------------- required from the parties to such Contracts upon sale of the Shares. (f) Employees and Agreements Relating to Employment. ----------------------------------------------- (i) Attached hereto as Schedule 4(f) is a listing of; (1) the ------------- names of all persons currently employed by the Companies, together with the amount it paid or payable to each such person for their services; (2) any bonus or other material compensation arrangements and personnel benefits or policies in effect, if any, for each employee; and (3) a complete copy of each such plan, benefit, and policy. (ii) Except as set forth on Schedule 4(f), Sellers have made no ------------- representation to any of the Companies' employees concerning their continued employment, if any, by the Companies after the date of this Agreement. Any decision by Purchaser to employ any of the employees of the Companies in the operation of the Stations on or after 12:01 a.m. on the date of this Agreement, other than those set forth on Schedule 4(f) shall be made in its sole discretion. ------------- (iii) No labor union is currently certified, or otherwise recognized, as the collective bargaining representative for any of the Companies' employees. Sellers have no actual knowledge of any labor strike, or other employee or labor controversy or dispute pending which would affect the operation of the Stations. 7 (iv) The Companies are not, and on the Closing Date will not be, except as disclosed on Schedule 4(f). a party to (a) any labor ------------- contract, (b) any vacation pay, severance pay or other benefit arrangement (including ERISA or similar plans) with their employees, or (c) any employment contract or agreement which is not terminable upon termination notice of thirty (30) days. (g) Litigation. Except as set forth on Schedule 4(a) attached hereto, ---------- ------------- as of the date of this Agreement and as of the Closing Date, there are and there will be no actions, judgments, suits, proceedings, investigations or inquiries pending or, to the knowledge of Sellers, threatened against or affecting the Companies or questioning the validity of any action taken or to be taken in connection with the implementation of the provisions of this Agreement, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, agency, court or instrumentality, domestic or foreign. Sellers do not know or have reasonable grounds to know of any factors or circumstances which might be the basis of any action, suit or proceeding; and, to the best of Sellers' knowledge, except as disclosed in Schedule 4(g). the Companies have ------------- complied with all applicable statutes and regulations of all governmental authorities and agencies having jurisdiction over the Companies. (h) Compliance with Law. As of the date hereof and as of the Closing ------------------- Date: (i) Generally. The Companies have complied, and are in compliance --------- in all material respects with, all laws, rules, regulations, and orders of any governmental entity applicable to the Companies and the Assets, including, without limitation, the Act and rules and regulations thereunder ("Applicable Laws"). The Companies have not been charged with and are not under investigation for any violation of Applicable Laws, and, to the knowledge of Sellers, there is not any basis for any such charge or investigation. (ii) Real Estate Matters. All of the Real Property and all ------------------- structures, transmitters, towers, equipment and improvements located thereon conform in all material respects with all applicable laws and regulations, including, without limitation, environmental, building and zoning laws and regulations, and no notice or actual knowledge of any violation of zoning, building or other laws, statutes and ordinances and regulations relating to such real property has been received or is known and there is no proposed, pending or threatened condemnation proceeding or similar action affecting any such Real Property. (iii) Hazardous Materials. Except as set forth on Schedule 4(h) ------------------- ------------- attached hereto, to the best of Sellers' knowledge, no hazardous or toxic materials (as hereinafter defined) exist in any structure located on, or exist on or under the surface of the Real Property. For purposes of this Agreement, "hazardous or toxic material" shall mean waste, substances, materials, smoke, gas, pollutants, contaminants, asbestos or asbestos related products, PCB's, petroleum, crude oil (or any fraction or distillate thereof) or particulate matter designated as hazardous, toxic or dangerous, or requiring special 8 handling, treatment or storage whether or not designated hazardous, toxic or dangerous under any environmental laws. For purposes of this Agreement "environmental law" shall be interpreted to mean the Comprehensive Environmental Response Compensation and Liability Act, any successor to such law, and/or any other applicable federal, state, or local environmental, health or safety law, rule or regulation concerning the treating, producing, handling, storing, releasing, spilling, leaking, pumping, pouring, emitting, or dumping of any waste, substance, materials, smoke, gas or particulate matter or imposing liability or standards in connection therewith. (i) Operation of Stations. --------------------- (i) The Companies have operated the Stations (1) in material compliance with their Licenses and Applicable Laws, and (2) in a manner which will not expose human beings to any level of non-ionizing radiation higher than the levels recommended for human exposure in "Safety Levels With Respect to Human Exposure to Radio Frequency Electromagnetic Fields, 3 kHz to 300 GHz" (ANSI/IEEE C95.1-1992), adopted by the IEEE and by the American National Standards Institute, November 1992. (ii) Sellers shall give prompt written notice to Purchaser if (i) the transmission of the regular broadcast programming of either of the Stations in the normal and usual manner is interrupted or discontinued other than as a result of weekly routine maintenance or public utility company activity; or (ii) either of the Stations is operated at less than ninety (90%) of its licensed operating power, in either event for a period in excess of (A) twenty-four (24) consecutive hours or (B) an aggregate of seventy-two (72) hours in any thirty (30) day period; or (iii) if hither of the Stations operate at reduced power for ten (10) days, thereby requiring written notification to the FCC pursuant to Section 73.1560(d) of the FCC Rules; or (iv) the programming format of either of the Stations is materially changed. (j) Insurance. As of the date hereof, the insurance policies owned by --------- the Companies or of which the Companies are named as additional insureds, set forth on Schedule 4(j) attached hereto, are now fully in effect in ------------- accordance with their terms, with no default in the payment of premiums on any such policy and no ground for cancellation or avoidance of any thereof or for reduction of the coverage provided hereby. (k) Absence of Insolvency. As of the date hereof and as of the Closing --------------------- Date, no insolvency proceedings of any character, including, without limitation, bankruptcy, receivership, reorganization, composition or arrangement with creditors, voluntary or involuntary, affecting the Companies or any of their respective assets or properties, are pending or, to the knowledge of Sellers, threatened, and the Companies have made no assignment for the benefit or creditors, nor taken any action with a view to, or which would constitute the basis for, the institution of any such insolvency proceedings. (I) Intangibles. As of the date hereof and as of the Closing Date, the ----------- Companies own and have the exclusive right to use all the patents, copyrights, service or trademarks and trade names, call letters, logos, slogans and other intangible property or rights ("Intangibles") presently used in conjunction with the operation of the Stations, together with 9 any goodwill associated therewith. To the best of Sellers' knowledge, the Intangibles are subject to no pending or threatened challenge and none of the Intangibles is bein9 infringed by the activities or operations of any third person and none is subject to any outstanding order, judgment decree, stipulation or agreement restricting the use thereof. (m) Programming and Copyrights. Except as set forth on Schedule 4(m) -------------------------- ------------- attached hereto, as of the date hereof and as of the Closing Date, the Companies own all programs and programming materials and elements, music libraries and software of whatever form or nature and used or held for use by the Companies in connection with the business and operation of the Stations, whether recorded on tape or any other media or intended for live performance, and whether completed or held in production and any related common law and statutory copyrights used or held for use by the Companies in connection with the business and operations of the Stations. (n) Financial Statements. Sellers have heretofore furnished Purchaser -------------------- with copies of the financial information of the Companies as set forth on the attached Schedule 4(n) ("Financial Statements"). Except as noted ------------- therein or on Schedule 4(n). the Financial Statements are complete and ------------- correct in all material respects, were prepared in accordance with other comprehensive bases of accounting principals consistently applied throughout the periods indicated and present fairly the financial condition of the Companies as of the dates thereof. Title to all assets referred to and shown on the most recent balance sheets, attached hereto as Exhibit F, --------- was vested in the Companies as of such date, free and clear of any liens, charges, or encumbrances, and its books of account, records, and files correctly reflect all operations and transactions, accounts and notes receivable, notes and accounts payable and all' other assets and liabilities. As of the date of this Agreement, accounts receivable shall be equal to or exceed the aggregate of the accounts payable and the interest on the long term debt and cash shall be zero. As of the Closing Date, Sellers shall satisfy the loans from the Sellers to the Companies and the mortgage held by Fleet, as reflected in the Financial Statements. (o) Taxes. As of the Closing Date, the Companies shall have timely ----- and duly filed with the appropriate governmental agencies all tax returns, declarations of estimated tax, and tax reports required to be filed by it, and all taxes and other assessments which the Companies are required to pay, withhold or collect have been timely and duly paid, withheld and collected. There are no present disputes as to taxes of any nature payable by the Companies, and they have not filed an IRS Form 872 ("Consent Fixing Period of Limitations Upon Assessment of Income Tax") or otherwise agreed to extend the time for assessment of any taxes against them for any year. (p) Existence and Powers. As of the date hereof and as of the Closing -------------------- Date, each of the Companies is a corporation duly organized, validly existing and in good standing under the laws of the State of New Jersey and has the power and authority to own or lease its properties and to carry on business as now being conducted. Each of the Sellers has full power and authority to enter into this Agreement and to carry out the transactions contemplated hereby, and this Agreement has been duly executed and 10 delivered by Sellers and constitute the legal, valid and binding obligation of Sellers, enforceable in accordance with its terms. (q) No Conflict. As of the date hereof and as of the Closing Date, ----------- neither the execution and delivery of this Agreement by Sellers nor the consummation of the transaction contemplated hereby in accordance with the terms hereof (i) will materially conflict with, result in a material breach of, or constitute a material default under any indenture, mortgage, lease or other agreement, to which the Companies or Sellers are a party or to which they or any of their properties may be subject or (ii) will result in a material violation of any order, writ, injunction, decree or award of any court or governmental authority to which the Companies or Sellers or any of their properties may be subject. (r) Charter Documents. Attached hereto as Exhibits G and H, ----------------- ---------- - respectively, are true and complete copies of the Certificates of Incorporation and the ByLaws of North Shore and Seashore, and all amendments thereto. As of the date `hereof and as of the Closing Date, such Certificates of Incorporation and By-Laws have not been and will not be modified, amended or revoked and remain in full force and effect. (s) No Approvals. Except for the consent of the FCC, no approval, ------------ consent, withholding of objection or other authorization is required or as of the Closing Date will be required from any court, administrative agency or governmental authority in connection with the execution, delivery or performance by Sellers of this Agreement and the related agreements referred to herein. (t) Ownership of Shares. Sellers own beneficially and of record all of ------------------- the Shares and no other person or entity owns beneficially or of record any interest in any of the Shares. Sellers now have and as of the Closing Date will have, and will transfer to Purchaser, good, valid and marketable title to all of the Shares, free and clear of all security interests, claims, liens, equities, options, proxies and other encumbrances whatsoever, and the Shares, when so sold and delivered, will be validly issued, fully paid and nonassessable. There is no transfer restriction, subscription, option, warrant, convertible security, right, call, contract, voting trust, irrevocable proxy, voting arrangement, commitment, understanding or agreement (other than this Agreement) relating to the Shares or their voting, issuance, sale, redemption or transfer. (u) Directors and Officers. The present directors and officers of the ---------------------- Companies are set forth on the attached Schedule 4(u). Such persons will be ------------- the directors and officers as of the Closing Date and the written resignations of such officers and directors shall be delivered to Purchaser concurrently with the delivery of the certificates representing the Shares. (v) Bank Accounts. Attached hereto as Schedule 4(v) is a listing of ------------- ------------- all bank accounts of the Companies. Sellers shall take any and all action and execute any documents required to close all accounts within thirty days of the Closing Date. 11 (w) Business of Companies. The Companies shall not engage in any --------------------- business other than the operation of the Stations to the extent required by the TBA and this Agreement. (x) Absence of Certain Changes. Since March 31, 1996, through the -------------------------- Date of this Agreement, there has not been (i) any material adverse change in the property of the Companies or any material labor dispute, grievance or organizational effort affecting the Assets, taken as a whole; (ii) any physical damage, destruction or loss (not covered by insurance) materially and adversely affecting the Assets or business of the Companies, taken as a whole; (iii) any sale, assignment, lease or other transfer or disposition of any of the Assets or Fee Property of the Companies except in the ordinary course of business and with adequate replacement property being acquired as necessary; or (iv) any waiver of any right resulting in a materially adverse affect on the Assets. 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. Purchaser represents ----------------------------------------------- and warrants to Sellers that the following statements as to the Purchaser are correct as of the date hereof and, where specifically indicated, will be correct at the Closing Date: (a) Powers of Purchaser. As of the date hereof and as of the Closing ------------------- Date, Purchaser has all the requisite power and authority to enter into this Agreement and to carry out the transactions contemplated hereby and this Agreement has been duly executed and delivered by Purchaser and constitutes the valid and binding obligation of Purchaser, enforceable in accordance with its terms. (b) No Conflicts. As of the date hereof and as of the Closing Date, ------------ neither the execution and delivery of this Agreement by Purchaser nor the consummation of the transactions contemplated hereby in accordance with the terms hereof (i) will materially conflict with, result in a material breach of, or constitute a material default under, any indenture, mortgage, lease or other agreement, to which Purchaser is a party or to which Purchaser or any of Purchaser's properties may be subject, or (ii) will result in a material violation of any order, writ, injunction, decree or award of any court or governmental authority to which Purchaser or any of Purchaser's properties may be subject. (c) No Approvals. Except for the consent of the FCC, no approval, ------------ consent, withholding of objection or other authorization is required or as of the Closing Date will be required, from any court, administrative agency or governmental authority in connection with the execution, delivery or performance by Purchaser of this Agreement and the related agreements referred to herein. (d) Insurance. So long as the TBA is in effect, Purchaser shall make --------- all reasonable efforts to ensure the renewal and keep fully in effect in accordance with their terms all insurance policies maintained by the Companies as set forth on Schedule 4(j). Purchaser shall reimburse Sellers ------------- for the payment of all premiums on all such policies and shall not engage in any activity which would result in cancellation of such policies. The 12 Companies shall be listed as named insureds under all insurance policies maintained by the Purchaser with respect to the Stations. Purchaser shall take all reasonable action to ensure that the Companies will remain as additional insureds on policies maintained by third parties in which the Companies, as of the date of this Agreement, are named as additional insureds and will be listed as additional insureds on. policies that may be obtained in the future by third parties with respect to the Stations. (e) FCC Qualifications. As of the date hereof and as of the Closing ------------------ Date, Purchaser is qualified, and knows of no reason why it should not be found qualified by the FCC, to be the transferee of control of the Companies. (f) Litigation. As of the date of this Agreement and as of the Closing ---------- Date, there are and there will be no actions, judgments, suits, proceedings, investigations or inquiries pending or, to the knowledge of Purchaser, threatened against or affecting the Purchaser or questioning the validity of any action taken or to be taken in connection with the implementation of the provisions of this Agreement, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, agency, court or instrumentality, domestic or foreign. Purchaser does not know or have reasonable grounds to know of any factors or circumstances which might be the basis of any action, suit or proceeding; and, to the best of Purchaser's knowledge, the Purchaser has complied with all applicable statutes and regulations of all governmental authorities and agencies having jurisdiction over the Purchaser. (g) Absence of Insolvency. As of the date hereof and as of the Closing --------------------- Date, no insolvency proceedings of any character, including, without limitation, bankruptcy, receivership, reorganization, composition or arrangement with creditors, voluntary or involuntary, affecting the Purchaser or any of its respective assets or properties, are pending or, to the knowledge of Purchaser, threatened, and the Purchaser has made no assignment for the benefit or creditors, nor taken any action with a view to, or which would constitute the basis for, the institution of any such insolvency proceedings. 6. CONDUCT PRIOR TO CLOSING. (a) Access and Information. Sellers shall give Purchaser and its ---------------------- representatives reasonable access throughout the period prior to Closing to the operations, properties, books, contracts, agreements, leases, commitments and records of the Companies at reasonable times, provided that the normal operations of the Companies' business shall not be disrupted. (b) Conduct of Station Business. Between the date hereof and Closing: --------------------------- (i) Sellers shall produce the consent of any third parties required by any contract, lease or agreement upon change of ownership of the Companies, if any. (ii) To the extent required under the TBA, Sellers shall cause the Companies to: (1) conduct the business of the Stations in a prudent and responsible manner 13 in good faith and in compliance with the terms of the Licenses and Applicable Laws; and (2) Sellers and Purchaser shall keep all of the Assets to be transferred hereunder in substantially the same operating condition and repair as of the date hereof, reasonable wear and tear excepted; (iii) The Companies shall not, outside the ordinary course of business (i) hire additional personnel or unreasonably increase the compensation or bonuses payable or to become payable to any of the Companies' employees, except as may be required by the FCC; (ii) enter into an agreement to sell, assign, lease, exchange or otherwise transfer or dispose of any of the Assets; (iii) enter into any new contract or renegotiate, modify, amend, renew, or terminate any existing contract, except that the Companies may, in the ordinary and usual course of business, enter into: (1) any contract(s) terminable on thirty (30) days notice or less without premium or penalty; and (2) any contract(s) consented to by Purchaser in writing; (iv) change the Stations' call letters, or change the Companies' facilities, or apply for any construction permit(s) with the FCC, without Purchaser's consent, which will not be unreasonably withheld or delayed, or make any material adverse changes in the Companies' leasehold improvements and other improvements and fixtures, or (v) except as required by law or any governmental agency, disclose any information relating to the Companies to any third party, other than to the Companies' authorized employees, agents and professional advisors in the ordinary course of business and other than to Purchaser and Purchaser's authorized representatives as provided for herein; (iv) The parties shall maintain in full force and effect the insurance described in Schedule 4(j); ------------- (v) Sellers shall give Purchaser notice of any unusual operating problems or developments affecting the Companies between the date hereof and the Closing Date, including, but not limited to, any problem or development which would materially adversely affect the Assets, and keep Purchaser fully apprised of all matters having material financial impact on the Companies; and (vi) Sellers and Purchaser shall conduct the business of the Stations in accordance with the TBA. In the event that there is a conflict between this Agreement and the TBA with respect to the conduct of the Stations, the TBA shall govern. (c) Inspections and Approvals. ------------------------- (i)Sellers and Purchaser agree that the Companies' title to the Fee Property shall be such title as a Title Company licensed to do business in New Jersey shall be willing to insure on its standard form and at standard rates, such title to be subject to (i) all standard exclusions and printed exceptions in the standard form of owner's policy of title insurance; (ii) encroachments and all other matters that would be disclosed by a current and accurate survey of the Fee Property; (iii) liens for taxes and assessments not yet due and payable; (iv) easements for public utilities affecting the Fee Property; (v) all easements, covenants, restrictions and rights-of-way affecting the Fee Property; (vi) the exceptions listed on Schedule 6(c) and (vii) both (a) any applicable zoning ordinances, ------------- 14 other land use laws and regulations, and (b) those matters, if any, which are waived by Purchaser pursuant to this Section (the foregoing title matters are hereinafter referred to as the "Permitted Title Exceptions"). Within thirty (30) days of the execution of this Agreement, Purchaser shall order, at Purchaser's sole cost and expense, a title commitment from a title insurance company authorized to do business in the State of New Jersey (the "Commitment"). If the Commitment reveals a defect in title which is not one of the Permitted Title Exceptions, or if prior to the Closing a defect in title arises after the date of the Commitment, either of which defect is not one of the Permitted Title Exceptions, Purchaser may either waive such defect or give prompt (within ten (10) days of receipt of such commitment or endorsement, time being of the essence) written notice to Sellers of such defect in title, whereupon Sellers may, at their option, attempt to cure such defect prior to the Closing or decline to cure such defect. Nothing contained herein shall be deemed or construed to require Sellers to incur any costs and expenses, or to bring any action or proceeding, to remove any defect in title. If Sellers are unable or unwilling to cure, on or before the Closing Date, any defect as to which Purchaser has notified Sellers as hereinabove provided and if buyer does not waive such defect, this Agreement shall be terminated, the Contract Deposit shall be returned to Purchaser, and thereafter neither party shall have any liability or obligation to the other pursuant to this Agreement except for those obligations specifically stated to survive cancellation or termination. Notwithstanding the foregoing, Sellers shall have the right, at its sole option, to extend the Closing Date by not more than sixty (60) days to attempt to cure any defect in title objected to by Purchaser in accordance with this Section 6. In the event the cure period extends the Closing Date beyond July 1, 2000, Sellers shall be entitled to additional Fixed Stow Payments of $108,333.33 for such cure period, and such amounts shall not be credited toward the Purchase Price set forth in Section 2. Sellers shall give Purchaser no less than five (5) business days notice of the new Closing Date. (ii) Environmental Audit. Purchaser shall promptly, at its ------------------- expense, arrange for such environmental investigations and audits (an "Audit") of the Real Property as it deems appropriate, including, without limitation (i) conditions with respect to or contamination or pollution of surface or ground waters, soil and air, (ii) the disposal, presence, release or threat of release of hazardous or toxic material thereon, and (iii) compliance with environmental laws or other Applicable Laws. Purchaser shall furnish Sellers with a copy of the report of any Audit within five (5) days after Purchaser's receipt thereof. If the Audit discloses a condition which materially contradicts the representations in Section 4(h)(iii), Purchaser may either: (1) Elect to consummate the purchase of the Shares in which case Sellers shall bear the cost of remediating such condition in an amount not to exceed $200,000 and such amount shall be deducted from the Purchase Price; or (2) Terminate this Agreement, in which case the Contract Deposit shall be returned to Purchaser, and thereafter neither party shall have any liability or obligation to the other pursuant to this Agreement 15 except for those obligations specifically stated to survive cancellation or termination. (iv) Engineering Inspection. It is agreed that within ten (10) ---------------------- days prior to the Closing Date, Purchaser's engineer may inspect the Assets to insure that its equipment complies with all warranties and conditions set forth herein. Sellers agrees to extend full cooperation to said engineer, including such access to the equipment and to logs pertaining thereto at such time or times as said engineer shall reasonably request. If Purchaser's engineer reports that the equipment fails to comply with said warranties, and Sellers dispute the report, Purchaser and Sellers shall jointly hire and pay a consulting engineer to give a report on the disputed item(s). The consulting engineer's report shall be final, and Sellers shall repair any equipment that the consulting engineer reports does not meet the warranty set forth in Subsection 4.2(b) prior to the Closing; provided, however, Sellers' obligation to repair shall not exceed Fifteen Thousand Dollars ($15,000). If the repairs required exceed such cap and Sellers refuse to make such repairs in excess of the cap, Purchaser may, at its sole option, either proceed with this Agreement or terminate this Agreement and have the Contract Deposit returned to it. (d) Risk of Loss. The risk of any loss, damage or destruction to any ------------ of the Assets from fire or other casualty or cause shall be borne by the Companies at all times prior to 12:01 a.m. on the Closing Date. Upon the occurrence of any loss or damage to any material portion of the Assets as a result of fire, casualty or other cause prior to Closing, Sellers shall notify Purchaser of same in writing immediately, stating with particularity the extent of such loss or damage incurred, the cause thereof if known, and the extent to which restoration, replacement and repair of the Assets lost or destroyed will be reimbursed under any insurance policy with respect thereto. Subject to the provisions hereof, Purchaser shall have the option (but not the obligation), in the event the loss or damage exceeds One Hundred Thousand Dollars ($100,000.00) and the property cannot be substantially repaired or restored within thirty (30) days, exercisable within ten (10) days after receipt of such notice from Sellers to: (i) postpone the Closing until such time as the property has been completely repaired, replaced or restored, unless the same cannot be reasonably effected within two (2) months of notification; (ii) elect to consummate the Closing and accept the property in its "then" condition, in which event Sellers shall at the Closing assign any and all rights under any insurance claim covering the loss and pay over any proceeds under any such insurance policy theretofore received by the Companies with respect thereto; or (iii) rescind `this Agreement at no cost or expense to Purchaser and declare the Agreement of no further binding force and effect, and have the Contract Deposit returned to it, if such repairs, replacements or restorations are not completed within ninety (90) days after the date specified herein as the Closing Date, provided that such repairs, replacements or restorations are necessary to the normal operation of the Stations. In the event Purchaser elects to postpone the Closing Date as provided in clause (i) of this Subsection, the parties hereto will cooperate to extend the time during which this Agreement must be closed as specified in the consent of the FCC referred to herein. 16 (e) Confidentiality. Between the date of this Agreement and the --------------- Closing Date, Purchaser will maintain strict confidentiality with respect to all documents and information furnished by or on behalf of the Companies or the Sellers- (except for documents or information required to be disclosed by law), and, if this Agreement is terminated, Purchaser shall return to Sellers all such documents and information. Notwithstanding the foregoing, Purchaser may make disclosure that may be required: (i) by its lenders; (ii) in the preparation of federal, state and local tax returns; (iii) pursuant to any federal or state securities laws; or (iv) as may be necessary to advise any of Purchaser's investors or advisors, provided that, in such case, Purchaser shall advise the investors of the confidentiality of the information. (f) Prohibited Action. Between the date of this Agreement and the ----------------- Closing Date, neither Purchaser nor Sellers will commit any act or omission that would: (i) prevent the Companies from transferring control of the Licenses or, as to Purchaser, as owner or operator of the Companies, the Stations and the Assets, (ii) jeopardize the validity of the Licenses; or (iii) interfere with the existing relationships between the Stations and their advertisers, suppliers and others. (g) Board of Directors. Simultaneously with the execution of this ------------------ Agreement, each of the Sellers shall elect Louis F. Mercatanti, Jr., or his designee, to the respective Boards of Directors of the Companies. The Sellers' shall continue to elect Louis F. Mercatanti, Jr. to the Boards through the Closing Date or sooner upon termination of this Agreement. 7. CLOSING (a) Closing Date. The Closing of the transactions contemplated herein ------------ shall be held on July 1, 2000 (the "Closing Date"); provided, however, that either party may accelerate the Closing Date so that the Closing can occur at any time after January 1, 1999 by providing at least six months written notice to the other party (the "Notice Date"). The Application (as that term is defined in Section 8) shall be filed within thirty (30) days of such notice. Unless either party requires additional time to cure pursuant to Sections 11 (b)(1)(iii), 6(c)(i), 6(c)(iv), or 6(d) or unless both parties consent to a later Closing, Closing shall occur by the latest of the following, on a day designated by Purchaser: (i) January 1,1999; (ii) six months after the Notice Date; or (iii) within thirty (30) days of the date upon which the approval of the FCC required for the consummation of the transactions contemplated herein shall become a "Final Order." "Final Order" shall mean the date on which the consent of the FCC is no longer subject to administrative or judicial reconsideration, review, appeal or stay. The parties hereby agree and stipulate that, absent the pendency of any petition, application or motion seeking reconsideration, review, appeal or stay of the written consent and for approval of the Application, and absent any FCC action reconsidering, reviewing, staying or modifying the consent, such consent shall be treated as final as of 12:01 A.M. on the forty-first day after the date of public notice issued by the FCC approving the assignment of the Licenses to Buyer. The Closing shall take place at the offices of Sterns & Weinroth, A Professional Corporation, at 9:00 A.M. local time, or such other time or place as mutually agreed. 17 (b) Condition to Obligations of Purchaser. The obligation of Purchaser ------------------------------------- to consummate the purchase of the Shares at the Closing shall be subject to the performance, in all material respects, on or prior to the Closing Date, of all of the covenants and agreements as set forth elsewhere in this Agreement to be performed by Sellers, and upon the following additional conditions: (i) The representations and warranties of Sellers are true or shall be true in all material respects as of the dates set forth in Section 4 and the Sellers shall have updated all Schedules through the --------- Closing Date; (ii) Except for normal wear and tear, there shall not have occurred any material adverse change in the condition of the Assets as a result of actions by other than the Purchaser; (iii) The consents required from all governmental agencies (including, without limitation, the Final Order of the FCC) to Purchaser's acquisition of the Shares shall have been granted, without any condition materially adverse to Purchaser, and such consents shall be valid and outstanding on the Closing Date; (iv) No action or proceeding shall be pending or threatened, challenging the validity of this Agreement or seeking to delay the consummation of any of the transactions for which this Agreement provides, which in the reasonable opinion of Purchaser is material to the transactions contemplated by this Agreement; (v) Sellers shall have obtained and delivered to Buyer the written consents of all requisite parties to assign and transfer to Buyer those Contracts material to the operation of the Stations without conditions materially adverse to Buyer, if any; (vi) Sellers shall have in all material respects performed and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by it prior to and on the Closing Date; and (vii) Sellers shall have received a letter of non-applicability or negative declaratory or remediation agreement or other documents permitting the transfer from the New Jersey Department of Environmental Protection pursuant to the Industrial Site Recovery Act. Purchaser shall have the right to waive any or all of the foregoing conditions of Closing at its sole option and risk. (c) Condition to Obligations of Sellers. The obligation of Sellers to ----------------------------------- consummate the sale of the Shares at the Closing shall be subject to the performance, in all material respects, on or prior to the Closing Date, of all of the covenants and agreements as set forth elsewhere in this Agreement to be performed by Purchaser, and upon the following additional conditions: 18 (i) The representations and warranties of Purchaser shall be true in all material respects as of the dates set forth in Section 5; (ii) The consents required from all governmental agencies (including, without limitation, the Final Order of the FCC) to Purchaser's acquisition of the Shares shall have been granted, without any condition materially adverse to Sellers, and such consents shall be valid and outstanding on the Closing Date; (iii) Purchaser shall have in all material respects performed and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by it prior to and on the Closing Date. Sellers shall have the right to waive any or all of the foregoing conditions of Closing at its sole option and risk. (d) No Right of Reversion. Both Sellers and Purchaser agree that the --------------------- Sellers have retained no right of reversion for the WOBM-AM or WOBM-FM licenses, no right to assignment of such licenses, and have not reserved the right to use the facilities of the Companies after the Closing Date for any reason whatsoever. 8. APPLICATION FOR FCC APPROVAL. (a) Filing and Prosecution of Application. Six months prior to the ------------------------------------- Closing Date established pursuant' to Section 7(a), Purchaser and the Companies shall join in an application to the FCC requesting the FCC's written consent, as applicable, to the sales of the Shares to Purchaser, to the consummation of the transactions contemplated by this Agreement (the "Application"). Both parties shall promptly respond to any requests for the submission of additional information and shall vigorously oppose any protests, petition to deny, petition for reconsideration or appeal of the FCC's consent and approval that may be filed. Purchaser and Sellers shall proceed with due diligence and promptly take all steps necessary to the expeditious prosecution of such application to a favorable conclusion, using their best efforts throughout. (b) Expenses. Each party shall bear its own expenses in connection -------- with the preparation of the applicable sections of the Application and in connection with the prosecution of such application. Sellers and Purchaser will divide and pay equally the filing and grant fees, if any, charged by the FCC. (c) Designation for Hearing. If, for any reason, the Application is ----------------------- designated for hearing by the FCC or if the parties are notified by the FCC in writing of its intention to designate the Application, either party, if not then in default, shall have the right by written notice within fifteen (15) days of such designation for hearing, to terminate this Agreement. (d) Control of Stations. The Sellers shall retain complete and ------------------- unfettered control over the operation of the Stations until this Agreement is consummated and this 19 Agreement shall not be consummated until the FCC has given its written consent to the transfer of control of the Licenses. (e) Best Efforts. Each party hereto agrees to use its best efforts in ------------ the performance and fulfillment of all terms and conditions of this Agreement and the TBA applicable to such party and in filing an application for the FCC's consent, and agrees to execute such other and further documents as may be reasonably required to carry out the intent of this Agreement. (f) Renegotiation to Conform to FCC Policies. In the event the FCC ---------------------------------------- determines at any time that any provision of this Agreement or of the TBA is violative of FCC policies and regulations, the parties agree that they will negotiate in good faith to remove the provision found violative or replace it with a provision consistent with FCC policies and regulations while the TBA remains in full force and effect. 9. BULK SALES LAW. Purchaser hereby waives compliance by Sellers with the provisions of all Bulk Sales Laws, or other similar provisions, provided, however that Sellers agree to indemnify and hold Purchaser harmless for any claims arising thereunder. 10. INDEMNIFICATION. (a) Survival of Representations and Warranties. All covenants and ------------------------------------------ agreements pertaining to matters to be performed after Closing and all representations and warranties contained in this Agreement shall survive for a period not to exceed two (2) years after the Closing Date ("Survival Period") except that the representations and warranties (a) with respect to title or (b) which the party making the same knew or would have, through the exercise of reasonable diligence, known to be false shall continue indefinitely. No claim which is the subject of the Survival Period may be brought under this Agreement or with respect to the transactions described herein 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 Survival Period. In the event such notice is so given, the right to indemnification with respect thereto under this Section 10 shall survive the Survival Period until such claim is finally resolved and any obligations with respect thereto are fully satisfied. (b) Indemnity by Sellers. Sellers agree to pay and discharge and to -------------------- save and protect Purchaser and its partners, officers, directors, shareholders and affiliates free and harmless from all obligations, claims and demands (including reasonable attorneys' fees incurred by Purchaser with respect thereto) (collectively "Sellers' Obligations") against, arising out of or in connection with any material breach or violation by Sellers of any covenant, agreement or warranty herein contained, or the inaccuracy of any material representation of Sellers made in this Agreement. (c) Indemnity by Purchaser. Purchaser agrees to pay and discharge and ---------------------- to save and protect Sellers free and harmless from all obligations, claims, and demands 20 (including but not limited to attorney fees incurred by Sellers with respect thereto) against, arising out of or in connection with any material breach of violation by Purchaser of any covenant, agreement or warranty herein contained or the inaccuracy of any material representation of Purchaser made in this Agreement. (d) Indemnification Procedure: Right of Offset. In the event that any ------------------------------------------ party hereto asserts a claim for indemnification hereunder, such party seeking indemnification shall give written notice to the indemnifying party specifying the nature and the amount, if known, of the claim asserted. The indemnifying party shall then have the right, using counsel reasonably satisfactory to the party seeking indemnification, to investigate, secure, contest or settle the claim alleged by such third party (hereinafter called a "contest"), provided that the party seeking indemnification may participate voluntarily, at its own expense, in any such contest through representatives and counsel of its own choice, and, provided further, that any such action by the indemnifying party relating to the contest shall be without prejudice to the party seeking indemnification. Except as provided otherwise in Section 10(d), the indemnifying party shall bear all costs of such contests and shall indemnify and hold the party seeking indemnification harmless against and from all costs, fees, and expenses of such contest. Unless and until the indemnifying party elects to prosecute the contest, the party seeking indemnification shall have the full right, at its option, to do so and to look to the indemnifying party under the provisions of this Agreement for the amount of the costs, if any, of prosecuting the contest. The failure of the indemnifying party to respond in writing to the aforesaid notice of the party seeking indemnification with respect to such contest within twenty (20) days after the receipt thereof shall be deemed an election not to prosecute the same. If the indemnifying party fails to prosecute the contest and the party seeking indemnification does not prosecute the contest or does so and the decision is rendered against it, the amount paid by the party seeking indemnification to the third party in settlement or satisfaction of the contest shall be deemed a valid claim hereunder. In the event that the contest involves any Sellers' Obligations, Purchaser shall have the right to offset the amount of the costs, if any, incurred by Purchaser in prosecuting the contest together with any sums owed in connection with the resolution or settlement thereof against amounts which may be owed by Purchaser to Sellers. The parties hereto shall make mutually available to each other all relevant information in their possession relating to any such contest and shall cooperate in the defense thereof. 11. TERMINATION BEFORE CLOSING; DEFAULT AND REMEDIES. (a) Termination before Closing. If Closing shall not have previously -------------------------- occurred, this Agreement may be terminated and rescinded and the Seller shall be given possession of the Assets within ten (10) days of termination: (i) If the Closing has not occurred on or before July 1, 2000 unless the Closing is delayed based on mutual agreement of the parties or a party requires additional time to cure pursuant to Section 11(b); 21 (ii) Pursuant to Section 6; (iii) By Purchaser, upon the occurrence of a Sellers' Event of Default (as defined in Section 11(b)) if the Purchaser is not then in default, or upon failure of a condition precedent to Purchasers' obligation to close set forth in Section 7(b); or (iv) By Sellers, upon the occurrence of a Purchaser's Event of Default (as defined in Section 11(b)) if the Sellers are not then in default, or upon failure of a condition precedent to Sellers' obligation to close set forth in Section 7(c). (b) Default and Remedies. -------------------- (i) Purchaser's Event of Default. The occurrence of any one or ---------------------------- more of the following events shall constitute a material default of this Agreement by Purchaser ("Purchaser's Event of Default"): (1) The material breach of any representation or warranty by Purchaser hereunder unless such breach is cured prior to the Closing Date; (2) The failure by Purchaser to consummate the transactions contemplated by this Agreement in violation of the provisions of this Agreement; (3) The failure by Purchaser to perform any other of its obligations under this Agreement, where such failure shall continue for a period of ten (10) days after delivery of written notice of demand therefor from Sellers to Purchaser provided, however, that if more than ten (10) days are reasonably required to cure such failure, then Purchaser shall not be deemed to be in default thereof if Purchaser, in good faith, has commenced such cure within said ten (10) day period and thereafter diligently prosecutes such cure to completion and completes such cure prior to Closing; (4) The revocation of either of the Licenses of the Companies solely as a result of the Purchaser's conduct separate and apart from entering into this Agreement and the TBA. (ii) Sellers' Event of Default. The occurrence of any one or more ------------------------- of the following events shall constitute a material default of this Agreement by Sellers ("Sellers' Event of Default"): (1) The material breach of any material representation or warranty by Sellers hereunder unless such breach is cured prior to the Closing Date; (2) The failure by Sellers to consummate the transactions contemplated by this Agreement in violation of the terms of this Agreement; (3) The failure by Sellers to perform any other of its obligations under this Agreement, where such failure shall continue for a period of ten (10) days after 22 delivery of written notice of demand therefor from Purchaser to Sellers; provided, however, that if more than ten (10) days are reasonably required to cure such failure, then Sellers shall not be deemed to be in default thereof if Sellers, in good faith, has commenced such cure within said ten (10) day period and thereafter diligently prosecutes such cure to completion and completes such cure prior to Closing. (iii) Purchaser's Right Upon Default. Sellers acknowledge that ------------------------------ the Companies are of a special, unique, and extraordinary character, and that any breach of this Agreement by Sellers could not be compensated for by damages. Accordingly, upon the occurrence of a Sellers' Event of Default, Purchaser shall be entitled, in addition to rescission or any other remedies that it may have, to enforcement of this Agreement (subject to obtaining any required approval of the FCC) by a decree of specific performance or injunctive relief requiring Sellers to fulfill its obligations under this Agreement. In any action to specifically enforce Sellers' obligation to close the transaction contemplated by this Agreement, Sellers shall waive the defense that there is an adequate remedy at law or in equity and agrees that Purchaser shall be entitled to obtain specific performance of Sellers' obligation to close hereunder without being required to prove actual damages. As a condition to seeking specific performance, Purchaser shall not be required to tender the Purchase Price but shall be required to demonstrate that Purchaser is ready, willing and able to tender the Purchase Price and consummate the purchase of the Shares as contemplated hereunder. Nothing in this subsection shall be construed to limit Purchaser's ability to sue Sellers for damages. (iv) Joint and Several Liability. In the case of a default by any --------------------------- Seller which eventuates in termination or rescission of this Agreement, all Sellers shall be jointly and severally liable to Purchaser for any damages sustained. (v) Sellers' Right Upon Default. Upon the occurrence of a --------------------------- Purchaser's Event of Default, Sellers shall have only the rights set forth in Sections 11(a) and 11(b)(vi), except an Event of Default under Section 11(b)(i)(4). Upon the occurrence of a Purchaser's Event of Default under Section 11(b)(i)(4), Sellers shall not be limited to pursue the remedies set forth in Sections 1(a) and 11(b)(vi), but in addition thereto shall have the right to pursue any and all legal and equitable remedies, including claims for compensatory and other damages. (vi) Liquidated Damages. Except where otherwise provided in this ------------------ Agreement, in the event of termination of this Agreement for any reason whatsoever and the Sellers are not in breach, the Sellers shall be entitled to retain the Contract Deposit and all Fixed Stow Payments (the "Liquidated Damages Amount") as liquidated damages, and not as a penalty. The parties agree that the Liquidated Damages Amount constitutes a reasonable sum considering all of the circumstances existing on the date of this Agreement, including the relationship of the sum to the range of harm to Sellers that could be reasonably anticipated and the anticipation that proof of actual damages would be costly or inconvenient. In placing their initials at the place provided below, Buyer and Sellers each specifically confirms the accuracy of the statements made above and the fact that each was represented by counsel who explained the consequences of this liquidated damages provision at the time this Agreement was made. The Sellers' remedy for default by the Purchaser shall be limited to 23 Liquidated Damages and return of possession of the Assets except as provided in Section 11 (b)(i)(4) and 11 (b)(v). SELLERS INITIAL HERE [INITIALS] -------------------- BUYER INITIAL HERE [INITIALS] ---------------------- 12. ACCESS TO BOOKS AND RECORDS. After the Closing Date, Purchaser and Sellers shall each allow the other reasonable access during normal business hours upon reasonable prior notice to their respective books and records pertaining to the operation of the Stations prior to the Closing Date and shall retain such records for a period of not less than three (3) years after the Closing Date. 13. NOTICES. All notices and other communications hereunder shall be in writing and be deemed to have been duly given if delivered personally or by overnight courier or sent by telecopy or mailed by registered mail, postage prepaid, addressed as follows: (a) If to Sellers, to: Joseph Buckelew 120 Adelaide Place Lakewood, New Jersey 08701 with a copy to: Lawrence E. Bathgate, Esq. Bathgate, Wegener & Wolf One Airport Road P.O. Box 2043 Lakewood, NJ 08701-2043 (b) If to Purchaser, to: Louis F. Mercatanti, Jr. Nassau Broadcasting Partners, L.P 600 Alexander Road Princeton, NJ 08540 24 with a copy to: Mark D. Schorr, Esq. Sterns & Weinroth, P.C. 50 West State Street, Suite 1400 P.O. Box 1298 Trenton, NJ 08607-1298 or such other address with respect to any party hereto as such party may from time to time notify (as provided above) to the other party hereto. Any such notice, demand or communication shall be deemed to have been given (i) if so mailed, as of the close of the third business day following the date so mailed, and (ii) if personally delivered or otherwise sent as provided above, on the date delivered or sent if sent by telecopy and on the next business day after the date sent in all other cases. 14. CONTROL OF STATION. Notwithstanding that certain duties shall be delegated to the Purchaser under the TBA, between the date hereof and the Closing Date, Sellers shall retain complete and unfettered control over the operation of the Stations. 15. EXPENSES. Unless otherwise agreed to in writing by the parties hereto, each party shall pay its own costs and expenses, including any and all legal and accounting fees, of its performance and compliance with all conditions and agreements contained herein on its or their part to be performed or complied with. 16. BROKERS. Purchaser and Sellers acknowledge and represent and warrant to each other that Serafin Brothers is the sole "Broker" in this transaction. Purchaser and Sellers each represent to the other that there is no other finder, consultant or broker involved in this transaction and that they have not agreed to pay any other finder, consultant or broker fee in connection with this transaction. If any other finder, consultant or broker claims a fee, the party whose actions led to that claim will bear sole responsibility for paying or settling that claim and shall indemnify the other party against the same. Purchaser shall be solely responsible for the Brokers fees. 17. DISCLOSURE OF EXHIBITS AND SCHEDULES. Notwithstanding anything to the contrary contained in this Agreement or in any of the Exhibits and Schedules, any information disclosed in one Exhibit or Schedule, as the case may be, shall be deemed to be disclosed in all Exhibits and Schedules. Certain information set forth in the Exhibits and Schedules, as the case may be, is included solely for informational purposes and may not be required to be disclosed pursuant to this Agreement. The disclosure of any information shall not be deemed to constitute an acknowledgment that such information 25 is required to be disclosed in connection with the representations and warranties made by Sellers in this Agreement or is material, nor shall such information be deemed to establish a standard of materiality. Except as expressly set forth in this Agreement, there are no representations or warranties, express or implied, being made by Sellers. 18. MISCELLANEOUS. ------------- (a) Complete Agreement. This Agreement, the Schedules and Exhibits ------------------ hereto, together with the TBA, constitute the final, integrated understanding and agreement of the parties with respect to the subject matter hereof, supersede all prior agreements, covenants, arrangements, letters, communications, representations or warranties, whether oral or written, and may not be modified, amended or terminated except by a written agreement specifically referring to this Agreement signed by the parties hereto. (b) No Waivers. No waiver of any breach or default hereunder shall be ---------- considered valid unless in writing and signed by the party giving such waiver, and no such waiver shall be deemed a waiver of any subsequent breach or default of the same or similar nature. No failure on the part of any party to exercise, and no delay in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege, and no waiver whatever shall be valid unless in writing signed by the party or parties to be charged and then only to the extent specifically set forth in such writing. All remedies, rights, powers and privileges, either under this Agreement or by law or otherwise afforded the parties to this Agreement, shall be cumulative and shall not be exclusive of any remedies, rights, powers and privileges provided by law. Each party hereto may exercise all such remedies afforded to it in any order of priority. (c) No Assignment. This Agreement shall be binding upon and inure to ------------- the benefit of the parties hereto and their respective successors and assigns; provided, however, that neither party may transfer or assign its rights or delegate its performance hereunder without the prior written consent of the other party, except that Purchaser shall be entitled to assign its rights hereunder at the Closing. This agreement shall be for the sole benefit of the parties hereto and their respective successors and assigns, and shall not be construed to provide any benefits to any third parties. (d) Headings. Paragraph headings contained herein are for the purposes -------- of convenience only and are not intended to define or limit the contents of any Schedule, Exhibit, Section or paragraph. (e) Further Assurances. Each party hereto shall cooperate and shall ------------------ take such further action and shall execute and deliver such further documents as may reasonably be requested by any other party in order to carry out the provisions and purposes of this Agreement. 26 (f) Choice of Law. This Agreement and all amendments thereto shall be ------------- governed by and construed in accordance with the laws of the State of New Jersey without regard to principles of conflicts of law. (g) Severability. Any provisions of this Agreement or any of the other ------------ documents delivered in connection with this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provision of this Agreement or such other document or affecting the validity or enforceability of such provision in any other jurisdiction. [REMAINDER OF PAGE INTENTIONALLY BLANK] 27 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written. WITNESS: SELLERS: /s/ Joseph E. Buckelew - ------------------------------ ------------------------------ JOSEPH E. BUCKELEW /s/ Jean M. Kvistad - ------------------------------ ------------------------------ JEAN M. KVISTAD /s/ Steven V. Lane - ------------------------------ ------------------------------ STEVEN V. LANE /s/ Edward Levy - ------------------------------ ------------------------------ EDWARD LEVY /s/ Roy G. Simmons - ------------------------------ ------------------------------ ROY G. SIMMONS ATTEST: PURCHASER: NASSAU BROADCASTING PARTNERS, L.P. By: Nassau Broadcasting Inc. its General Partner By: /s/ Louis F. Mercatanti - ------------------------------ -------------------------- LOUIS F. MERCATANTI, President 28 EX-2.5 6 0006.txt ASSET PURCHASE AGMT DTD 1/21/1999 Exhibit 2.5 ASSET PURCHASE AGREEMENT THIS AGREEMENT is made and entered into this 21st day of January, 1999 between MULTICULTURAL RADIO BROADCASTING, INC., a New Jersey corporation ("Seller") and NASSAU BROADCASTING PARTNERS, L.P., a Delaware limited partnership ("Buyer"). STATEMENT OF FACTS 1. Seller is the licensee and operator of radio station WJHR-AM, licensed to Flemington, New Jersey (the "Station"). 2. Subject to the consent of the Federal Communications Commission ("FCC"), Buyer desires to acquire the Station, and all of the assets, leases, contracts, agreements, licenses, and other property used or useful in the operation of the Station, with certain exceptions as provided herein, and the Seller desires to transfer such assets to Buyer. NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties intending to be legally bound hereby, agree as follows: 1 . SALE AND TRANSFER OF ASSETS. At the Closing, Seller will sell, assign, transfer and deliver to Buyer the following: 1.1 ASSETS TO BE TRANSFERRED. Subject to the terms and conditions of this Agreement, on the Closing Date (as defined in Section 10.1), Seller shall sell, convey, assign, transfer and deliver to Buyer, and Buyer shall purchase and accept, all of the business, rights, properties and assets, real and personal, tangible and intangible, of every type and description owned by Seller and used or held for use in connection with the business and operations of the Station together with all rights and privileges associated with such assets and business of the Station, except for Excluded Assets (as defined in Section 1.2) (collectively, the "Assets"). Without limiting the foregoing, the Assets shall include the following: 1.1 (a) LICENSES AND AUTHORIZATIONS. Subject to prior FCC consent, all of the FCC authorizations issued to the Seller, as listed and described in SCHEDULE 1.1(a) with respect to the Station and their auxiliaries, including without limitation, all rights in and to the call letters WJHR-AM and any variations thereof, to the extent that they can be conveyed, and all applications therefor, together with any renewals, extensions or modifications thereof and additions thereto or applications filed between the date hereof and the Closing Date (collectively, "Licenses"). All of Seller's interest in the Licenses will be assigned to Buyer as hereinafter provided; 1 1.1(b) TANGIBLE PERSONAL PROPERTY. All equipment, electrical devices, antennas, cables, vehicles, furniture, fixtures, towers, office materials and supplies, hardware, tools, spare parts, records, tapes, discs, carts and other tangible personal property of every kind and description owned by Seller and used or held for use (including those not in operating condition) in connection with the business and operations of-the Station on the Closing Date, including without limitation those listed and described on SCHEDULE 1.1(b) attached hereto or any replacements thereafter acquired prior to the Closing Date (except as may be consumed in the ordinary course of business) and including all rights under manufacturers' and vendors' warranties to the extent transferable; 1.1(c) OWNED REAL PROPERTY. Seller currently leases the real property which contains the radio station studio and towers, which such lease is more fully described in Section 1.1(d) below. As part of that lease, Seller has an option to purchase the real estate. Seller shall exercise its option to purchase on or before 6/15/00 and close on the purchase on or before the date of closing hereunder. At the time of closing under the Agreement, Seller agrees to convey the real property to Buyer. Buyer agrees to pay as additional consideration the sum of $225,000.00, plus the sum of $2,250.00 per month for the number of months Seller holds the real estate until closing hereunder, plus a sum equal to Seller's closing costs actually paid for the acquisition of the real estate. In the event Seller is unable to acquire the real estate prior to closing, Seller shall assign its lease of the premises to Buyer. 1.1(d) LEASED REAL PROPERTY. Any of the leases of real property with respect to real property leased by Seller and used or held for use in connection with the business and operations of the Station on the Closing Date, described on SCHEDULE 1. 1 (d) attached hereto, to the extent such leases are transferable ("Leased Property"). The lease terms shall continue as set forth in the leases for the Leased Property; 1.1(e) AGREEMENTS FOR SALE OF TIME: TRADE/BARTER AGREEMENTS. Those orders and agreements now existing for the sale of advertising time on the Station, to the extent of the unexpired portion thereof, for cash ("Cash Agreements") as listed and described in SCHEDULE 1.1(e)-1; those orders, agreements and arrangements for the exchange of advertising time, to the extent of the unexpired portion thereof for consideration other than cash ("Trade Out Agreements"), as listed and described in SCHEDULE 1. 1 (e)-2; all Cash Agreements and all Trade Out Agreements entered into in the ordinary course of business between the date hereof and the Closing Date to the extent of the unexpired portion thereof, provided that trade payables do not exceed trade receivables; all to the extent transferable or assignable. 1.1(f) OTHER CONTRACTS. All unexpired contracts, agreements, arrangements, commitments or understandings, written or oral described in SCHEDULE 2 1.1(f) (including those entered into in the ordinary course of business prior to the Closing Date) hereto, to the extent transferable or assignable; 1.1(g) INTANGIBLE RIGHTS. Any trademarks, trade names, service marks, franchises, patents, jingles, slogans, logotypes and other intangible rights, owned and used or held for use by Seller on the Closing Date in connection with the business and operations of the Station, including those listed and described on SCHEDULE 1.1(g) hereto to the extent that Seller has the right to use and assign them; 1.1(h) PROGRAMMING AND COPYRIGHTS. All programs and programming materials and elements, music libraries and software of whatever form or nature owned by Seller and used or held for use in connection with the business and operation of the Station on the Closing Date, whether recorded on tape or any other media or intended for live performance, and whether completed or held in production and any related common law and statutory copyrights owned by Seller and used or held for use in connection with the business and operations of the Station, or licensed or sublicensed to Seller in connection therewith, to the extent that Seller has the right to use and assign them; 1.1(i) FCC RECORDS. All FCC station logs and other records that relate to the operation of the Station as are required to be maintained under the rules and regulations of the FCC, including, but not limited to, an up-to-date and complete local public file; 1.1(j) FILES AND RECORDS. All original files and other records of Seller relating to the business and operations of the Station owned and in the possession of Seller (other than records relating to the corporate nature of Seller such as corporate minutes, corporate tax records and similar corporate records), including without limitation all available schematics, blueprints, engineering data, customer lists, reports, specifications, projections, statistics, promotional graphics, original art work, mats, plates, negatives and other advertising, marketing or related materials, and copies of all other technical and financial information concerning the Station and the Assets; and 1.1(k) GOODWILL. All of Seller's goodwill in, and going concern value of, the Station. 1.2 EXCLUDED ASSETS. There shall be excluded from the Assets, and retained by Seller, to the extent in existence on the Closing Date the following assets listed in SCHEDULE 1.2 (collectively, the "Excluded Assets"): 1.2(a) CASH AND INVESTMENTS. All cash on hand or in bank accounts, and any and all other cash equivalents, including without limitation certificates of deposit, commercial paper, treasury bills, asset or money market accounts and all such similar 3 accounts or investments, or notes or other entitlements evidencing loans receivable and any securities owned or held by Seller; 1.2(b) CERTAIN ASSETS. Pension, profit sharing and savings plan and trusts and any assets thereof; 1.2(c) CONSIDERATION. The consideration delivered by Buyer to Seller pursuant to this Agreement; 1.2(d) FILES AND RECORDS. The files and records referred to in the parenthetical in Section 1.1 (j); 2. PURCHASE PRICE AND PAYMENT. 2.1 PURCHASE PRICE. Buyer shall at Closing pay to Seller as consideration for all of the Assets to be sold and bought hereunder pursuant to Section 1.1, the sum of Two Million Five Hundred Thousand Dollars ($2,500,000.00) including any sums for the real estate, if applicable, as described in Section 1.1(c) ("Purchase Price"), including the funds to be deposited pursuant to Section 2.2 plus the assumption of liabilities described elsewhere in this Agreement. 2.2 EARNEST MONEY DEPOSIT, LIQUIDATED DAMAGES. Buyer shall cause to be deposited the sum of One Hundred and Thirty Thousand Dollars ($130,000.00) (the "Escrow Amount") with Timothy R. Smith, Esq. (the "Escrow Agent") upon execution of this Agreement. All funds are to be held by the Escrow Agent in an interest-bearing account until the Closing, as hereinafter defined, with all interest thereon accruing to Buyer pursuant to the terms of the Escrow Agreement attached hereto as EXHIBIT A. At the Closing, unless otherwise provided herein, Escrow Agent shall deliver the Escrow Amount together with any accrued interest thereon, to Seller in accordance with the terms of the Escrow Agreement. The accrued interest shall be credited to the Purchase Price. In the event of rightful termination of this Agreement pursuant to Section 14.1(a), (b) or (c) the Escrow Amount, together with any and all interest accrued thereon, shall be returned to Buyer. In the event of rightful termination of this Agreement by Seller as the result of a Buyer's Event of Default as defined in Section 14.2 and Seller is not in material breach of its obligations and representations hereunder, Buyer shall cause the Escrow Amount ("Liquidated Damages Amount") to be paid to Seller as liquidated damages, and not as a penalty, with all interest on the Escrow Amount accruing to the benefit of the Seller. The parties agree that the Liquidated Damages Amount constitutes a reasonable sum considering all of the circumstances existing on the date of this Agreement, including the relationship of the sum to the range of harm to Seller that could be reasonably anticipated and the anticipation that proof of actual damages 4 would be costly or inconvenient, in the event of Buyer's inability or failure to close as provided herein. In placing their initials at the place provided below, Buyer and Seller each specifically confirms the accuracy of the statements made above and the fact that each was represented by counsel who explained the consequences of this liquidated damages provision at the time this Agreement was made. SELLER INITIAL HERE [INITIALS] --------- BUYER INITIAL HERE [INITIALS] --------- 2.3 METHOD OF PAYMENT OF PURCHASE Price. The Purchase Price shall be paid at the Closing as follows: 2.3(a) ESCROW AMOUNT. Escrow Agent shall deliver the Escrow Amount to Seller in accordance with the terms of the Escrow Agreement. 2.3(b) BALANCE OF PURCHASE PRICE. In addition to the Escrow Amount to be delivered to Seller by the Escrow Agent pursuant to Subsection 2.3(a) hereof, the Buyer shall deliver to Seller a wire transfer payable as directed by Seller in the amount of Two Million Three Hundred Seventy Thousand Dollars ($2,370,000.00), plus any sum due for the real estate, if applicable, as described in Section 1.1(c). 3. NO ASSUMPTION OF LIABILITIES. The (i) leases described in Section 1.1(d), (ii) orders and agreements described in Section 1.1(e), (iii) contracts, agreements, arrangements, commitments and understandings described in Schedule 1.1(f) and (iv) the trade payables (to the extent they do not exceed trade receivables) of the Seller outstanding on the Closing Date, are herein referred to as the "Assumed Obligations" and are the only agreements, contracts, obligations or commitments of Seller, whether known or unknown, contingent or otherwise that are to be assumed by Buyer as of the Closing Date. Except for the Assumed Obligations, Seller shall be solely responsible, and there shall be no assumption of liability by Buyer, for any agreement, contract, obligation or commitment of Seller, whether known or unknown, contingent or otherwise, relating to either the Station or any of the affairs of Seller, including, but not limited to, any agreement, executed or executory, relating to the exchange of time on the Station for goods, wares, services, promotions, merchandising or anything other than cash. Buyer shall not be obligated to perform any contract, agreement, obligation or commitment of Seller, whether known or unknown, contingent or otherwise, not specifically assigned to and assumed by Buyer hereunder. 4. SELLER'S REPRESENTATIONS AND WARRANTIES. 5 As used in this Section 4, references to Seller's knowledge shall mean Seller's knowledge after Seller has exercised due diligence in making inquiries of its personnel. Seller represents and warrants that the following statements as to Seller and the Assets and the Station are correct as of the date hereof and will be correct at the Closing Date. 4.1 LICENSES, AUTHORIZATION AND COMPLIANCE THEREWITH. Seller owns and/or has all franchises, licenses, permits, consents, approvals or authorizations of any public or governmental agency materially necessary to the conduct by Seller of its business as now conducted, including, but not limited to, the Licenses described in Schedule 1. 1 (a) hereto, without any material conflict with the rights of others, all of which are in full force and effect and to the best knowledge of Seller subject to no lien, charge, encumbrance, or limitation. Without material exception, Seller is in compliance with all of its obligations with respect thereto; and no event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any of the foregoing or would materially adversely affect the rights of Seller thereunder. Except as may be provided in SCHEDULE 1.1 (a), Seller has no knowledge of any applications or any material complaints or proceedings pending or threatened as of the date hereof before the FCC directly relating to the business or operation of the Station other than proceedings which generally affect the broadcast industry. Further, on the Closing Date, the Station will, unless otherwise provided in Section 4.8(b) below, be on the air operating at full licensed power (consistent with the FCC's Rules and Regulations, the Communications Act of 1934, as amended (the "Act"), and regulations promulgated thereunder) under their present licenses. All FCC requirements for such authority will have been met, and there will be no uncorrected FCC violations. If notice of any such violation (other than violations that involve Buyer) is received or if Seller hereinafter becomes aware of any such violation prior to Closing, Seller, at its own expense, shall eliminate and cause to be removed all such violations by the date of Closing. All returns, reports and statements required to be filed with the FCC or other governmental agency relating to the Station have been or will be duly and timely filed, and all said reports, returns and statements are or will be complete and correct as filed. The "Public Inspection File" of the Station will be complete and in full compliance with Section 73.3526 of the FCC's Rules and Regulations on the Closing Date. 4.2 ASSETS/FEE PROPERTY. 4.2(a) ASSETS/RIGHTS, ETC. TO SELL. Seller is the owner of and will at the Closing Date have good title to the Assets, and will on the Closing Date have full legal right, power and authority to assign, transfer and sell the Assets to Buyer, free and clear of all claims, security interests, mortgages, pledges, liens and other encumbrances of every nature whatsoever. No action is pending or, to the knowledge of Seller, threatened, which would contest the ownership of, or right to transfer, any of the Assets. The Assets will not at the Closing Date be subject to any contract, sale or other agreement, except as disclosed in writing to and expressly assumed or taken 6 subject to by Buyer hereunder, and the delivery of the Assets to Buyer pursuant to the provisions of this Agreement will transfer good and valid title thereto, free and clear of all claims, security interests, mortgages, pledges, liens and other encumbrances of every nature whatsoever. 4.2(b) CONDITION OF TANGIBLE PERSONAL PROPERLY. The equipment described in SCHEDULE 1.1(b) hereto comprises all the equipment used to operate the Station as it is presently being operated in material compliance with the FCC's Rules and Regulations. From the date hereof until Closing, the Station and equipment will be operated and maintained in accordance with good engineering practices and to the best of Seller's knowledge in material compliance with all of the FCC's Rules and Regulations. Except as disclosed in Schedule 1.1(b), there are no material defects in any of the structures, improvements, electronic equipment or other tangible personal assets of the Station, all of which are in operating condition subject to normal wear and tear. 4.2(c) FEE PROPERTY. With respect to the Fee Property: (i) Seller is not a "foreign person" as that term is used in Internal Revenue Code Section 1445 ("IRC ss.1445"), and Seller agrees to furnish Buyer, at or prior to Closing, an Affidavit of Non-Foreign Status or any other documentation required under IRC ss.1445 to evidence that Seller is not a "foreign person"; (ii) Except as listed on SCHEDULE 4.2, there are no leases, rental agreements or other agreements relating to the Fee Property which are to remain in effect after Buyer takes title to the Fee Property; and (iii) Seller has not received any written notice with respect to the Fee Property of any threatened rezoning, annexation, condemnation or modification proceeding which proceeding is still pending. 4.3 CONTRACTS, LEASES, AGREEMENTS, ETC. Each of the contracts, agreements, easements, licenses and leases (collectively, "Contracts") described in Sections 1.1 (d), 1.1 (e) and 1.1 (f) hereto is as to Seller valid, binding and enforceable in accordance with its terms and Seller is not in any material respect in default thereunder. Except for Contracts marked with an asterisk on Schedules 1.1(d), 1.1(e)-l, 1.1(e)-2 and 1.1(f) ("Contract Schedules"), no consents are required to assign to Buyer Seller's interest in any such Contract. Each such Contract may be assumed by Buyer without any material adverse change, and is now, and on the Closing Date will be, in full force and effect. 4.4 EMPLOYEES AND AGREEMENTS RELATING TO EMPLOYMENT. 7 4.4(a) No labor union is currently certified, or otherwise recognized, as the collective bargaining representative for any of the Station's employees. Seller has no actual knowledge of any labor strike, or other employee or labor controversy or dispute pending which would materially affect the operation of the Station. 4.4(b) Seller is not, and on the Closing Date will not be, except as disclosed on Schedule 4.4, a party to (a) any labor contract, (b) any vacation pay, severance pay or other benefit arrangement (including ERISA or similar plans) with its employees, or (c) any employment contract or agreement which is not terminable upon termination notice of thirty (30) days. 4.5 LITIGATION. Except as disclosed on SCHEDULE 4.5, there are no actions, judgments, suits, proceedings, investigations or inquiries pending or, to the knowledge of Seller , threatened against Seller in connection with this Station or questioning the validity of any action taken or to be taken in connection with the implementation of the provisions of this Agreement, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, agency, court or instrumentality, domestic or foreign. Seller does not know or have reasonable grounds to know of any factors or circumstances which might be the basis of any action, suit or proceeding relating to this station; and, to the best of Seller's knowledge, except as disclosed in SCHEDULE 4.5, Seller has complied with all applicable statutes and regulations of all governmental authorities and agencies having jurisdiction over Seller's ownership and operation of this Station. 4.6 COMPLIANCE WITH LAW. 4.6(a) GENERALLY. Seller has complied and is in compliance in all material respects with all laws, rules, regulations, and orders of any governmental entity applicable to Seller, the Assets and the Fee Property, including, without limitation, the Act and rules and regulations thereunder ("Applicable Laws"). Seller has not been charged with and is not under investigation for any violation of Applicable Laws, nor, to the knowledge of Seller, is there any basis for any such charge or investigation. 4.6(b) REAL ESTATE MATTERS. To Seller's best knowledge, all of the Real Property and all structures, transmitters, towers, equipment and improvements located thereon conform in all material respects with all applicable laws and regulations, including, without limitation, environmental, building and zoning laws and regulations, and no notice or actual knowledge of any violation of zoning, building or other laws, statutes and ordinances and regulations relating to such real property has been received or is known and there is no proposed, pending or threatened condemnation proceeding or similar action affecting any such Real Property. 4.6(c) HAZARDOUS MATERIALS. Except as disclosed on SCHEDULE 4.6, or as disclosed to Buyer as a result of the environmental inspection referred to in Section 8 7.3(b), to the best of Seller's knowledge, no hazardous or toxic materials (as hereinafter defined) exist in any structure located on, or exist on or under the surface of the Real Property. For purposes of this Agreement, "hazardous or toxic material" shall mean waste, substances, materials, smoke, gas, pollutants, contaminants, asbestos or asbestos related products, PCB'S, petroleum, crude oil (or any fraction or distillate thereof or particulate matter designated as hazardous, toxic or dangerous, or requiring special handling, treatment or storage whether or not designated hazardous, toxic or dangerous under any environmental laws. For purposes of this Agreement "environmental law" shall be interpreted to mean the Comprehensive Environmental Response Compensation and Liability Act, any successor to such law, and/or any other applicable federal, state, or local environmental, health or safety law, rule or regulation concerning the treating, producing, handling, storing, releasing, spilling, leaking, pumping, pouring, emitting, or dumping of any waste, substance, materials, smoke, gas or particulate matter or imposing liability or standards in connection therewith. 4.7 EXISTENCE AND POWERS; NO CONFLICT. Seller is a New Jersey corporation duly organized, validly existing and in good standing under the laws of the State of New Jersey, and is duly authorized to conduct business in the State of New Jersey, and has the power and authority to own or lease its properties and to carry on business as now being conducted, and has all requisite power and authority to enter into, deliver and perform this Agreement. The execution, delivery, and performance of this Agreement by Seller has been duly and validly authorized by the Board of Directors of Seller, and no other action is required. Except as disclosed on Schedule 4.7, neither the execution and delivery of this Agreement by Seller, nor the compliance by Seller with the respective terms thereof: (i) will, to the best of Seller's knowledge, breach any Applicable Laws; (ii) will conflict with or result in a breach of or constitute a default (or an event which, with notice or lapse of time, or both, would become a default) under any of the terms, conditions or provisions of any judgment, order, arbitration, injunction, decree or ruling of any court or governmental authority to which Seller or any of the Assets is subject or of Seller's Articles of Incorporation or any agreement, commitment, arrangement, lease, insurance policy, or other instrument to which Seller is a party or by which it is bound; (iii) will result in the creation of any lien, equitable lien, tax lien, mortgage, charge, security interest or other encumbrance upon any of the Assets; (iv) to Seller's best knowledge will give to any other person any interests or rights, including rights of termination or cancellation, in or with respect to any of the priorities, assets, agreements, contracts or business of Seller; (v) will result in the loss or adverse modifications of the Licenses or any other license, franchise, permit or other governmental authorization granted to or held by Seller; or (vi) require the consent of any person except as disclosed in this Agreement. 4.8 OPERATION OF STATION. 4.8(a) The Station has been, and shall continue to be, operated (1) in 9 compliance with the Licenses and the Applicable Laws, and (2) in a manner which will not expose human beings to any level of non-ionizing radiation higher than the levels recommended for human exposure in FCC Report & Order ET Docket 93-62, released August 1, 1996. 4.8(b) Seller shall give prompt written notice to Buyer if (i) the transmission of the regular broadcast programming of the Station in the normal and usual manner is interrupted or discontinued other than as a result of weekly routine maintenance or public utility company activity, (ii) the Station is operated at less than seventy-five (75%) of its licensed operating power for a period in excess of (A) twenty-four (24) consecutive hours or (B) an aggregate of seventy-two (72) hours in any thirty (30) day period; (iii) the Station operates at reduced power for ten (10) days, thereby requiring written notification to the FCC pursuant to Section 73.1560(d) of the FCC Rules; or (iv) the programming format of the Station is materially changed. 4.9 INSURANCE. Buyer will obtain any and all insurance. Notwithstanding the foregoing, existing insurance policies, set forth on Schedule 4.9, are now and on the Closing Date will be in effect in accordance with their terms without default. 4.10 ABSENCE OF INSOLVENCY. No insolvency proceedings of any character, including, without limitation, bankruptcy, receivership, reorganization, composition or arrangement with creditors, voluntary or involuntary, affecting the Seller or any of its respective assets or properties, are pending or, to the knowledge of Seller threatened, and Seller has made no assignment for the benefit or creditors, nor taken any action with a view to, or which would constitute the basis for, the institution of any such insolvency proceedings. 4.11 INTANGIBLES. Seller has the right to use all the patents, copyrights, service or trademarks and trade names, call letters, logos, slogans and other intangible property or rights ("Intangibles") presently used in conjunction with the operation of the Station, together with any goodwill associated therewith. To the best of Seller's knowledge, these Intangibles are subject to no pending or threatened challenge and none of the Intangibles is being infringed by the activities or operations of any third person, and none is subject to any outstanding order, judgment, decree, stipulation or agreement restricting the use thereof. 4.12 FINANCIAL STATEMENTS. Seller has furnished Buyer with copies of the following financial statements: WJHR 1998 Income and Expenses and WJHR 1999 Projections and Expenses. The Financial Statements are complete and correct in all material respects, were prepared on a GAAP basis and present fairly the financial position and results of operation of Seller at the dates and for the periods to which they relate. Seller represents that Seller has retained work papers, files, ledgers and other records and that Seller will make the same reasonably available to Buyer for purposes 10 of review of the same by Buyer or Buyer's representatives in connection with this Agreement or Buyer's pending public offering of certain securities. 4.13 TAXES. As of the Closing Date, Seller shall have timely and duly filed with the appropriate governmental agencies all tax returns, declarations of estimated tax, and tax reports required to be filed by it, and all taxes and other assessments which Seller is required to pay, withhold or collect have been timely and duly paid, withheld and collected. There are no present disputes as to taxes of any nature payable by Seller with respect to the Station, and it has not filed an IRS Form 872 ("Consent Fixing Period of Limitations Upon Assessment of Income Tax") or otherwise agreed to extend the time for assessment of any taxes against it for any year. Any additional taxes, interest, penalties, assessments and deficiencies that shall become due and payable with respect to any tax return or tax obligation of Seller shall be the sole responsibility of Seller. 4.14 ABSENCE OF CERTAIN CHANGES. There has not been (i) any material adverse change in the property of Seller or any material labor dispute, grievance or organizational effort affecting the Assets, taken as a whole; (ii) any physical damage, destruction or loss (not covered by insurance) materially and adversely affecting the Assets or business of Seller, taken as a whole; (iii) any sale, assignment, lease or other transfer or disposition of any of the assets or properties of Seller, except in the ordinary course of business and with adequate replacement property being acquired as necessary; or (iv) any waiver of any right resulting in a materially adverse affect on the Assets. 5. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and warrants that the following statements as to Buyer are correct as of the date hereof and will be correct at the Closing Date: 5.1 FCC QUALIFICATIONS. Buyer is qualified and knows of no reason why Buyer should not be found to be qualified to acquire the Licenses. 5.2 EXISTENCE AND POWERS; NO CONFLICT. Buyer is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware and is authorized to do business in the State of New Jersey and has the power and authority to own or lease its properties and to carry on business as now being conducted, and has all requisite power and authority to enter into, deliver and perform this Agreement. The execution, delivery, and performance of this Agreement by Buyer have been duly and validly authorized by Buyer's corporate general partner and no other action is required. Neither execution and delivery of this Agreement by Buyer, nor the compliance by Buyer with the respective terms thereof: (i) will, to Buyer's best knowledge, breach any Applicable Laws; (ii) will conflict with or result in a breach of or constitute a default (or an event which, with notice or lapse of time, or both, would 11 become a default), under any of the terms, conditions or provisions of, any judgment order arbitration injunction, decree or ruling of any court or governmental authority to which buyer is subject, or any of Buyer's partnership agreement, or any contract commitment arrangement or agreement to which Buyer is party or by which it may be bound; or (iii) require the consent of any person except as disclosed in this Agreement. 5.3 DISCLOSURE. No covenant, representation or warranty made by Buyer in this Agreement and no statement made in any certificate or document furnished or to be furnished by Buyer in connection with the transactions contemplated by this Agreement contains or will contain as of the date made and the Closing Date any untrue statement of a material fact or omits or will omit to state any material fact necessary to make such representation, warranty or statement not misleading to Seller. 5.4 LITIGATION. Except as disclosed on SCHEDULE 5.4, there are no actions, judgments, suits, proceedings, investigations or inquiries pending or, to the knowledge of Buyer, threatened against or affecting Buyer or questioning the validity of any action taken in connection with the implementation of the provisions of this Agreement, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, agency, court or instrumentality, domestic or foreign. Buyer does not know or have reasonable grounds to know of any factors or circumstances which might be the basis of any action, suit or proceeding; and, to the best of Buyer's knowledge, except as disclosed in SCHEDULE 5.4, Buyer has complied with all applicable statutes and regulations of all governmental authorities and agencies having jurisdiction over Buyer. 5.5 ABSENCE OF INSOLVENCY. No insolvency proceedings of any character, including, without limitation, bankruptcy, receivership, reorganization, composition or arrangement with creditors, voluntary or involuntary, affecting the Buyer or any of its respective assets or properties, are pending or, to the knowledge of Buyer, threatened, and Buyer has made no assignment for the benefit or creditors, nor taken any action with a view to, or which would constitute the basis for, the institution of any such insolvency proceedings. 6. CONDUCT PRIOR TO CLOSING. 6.1 ACCESS AND INFORMATION. Upon reasonable, advance notice, Seller shall give Buyer and its representatives reasonable access throughout the period prior to Closing to the operations, properties, books, contracts, agreements, leases, commitments and records of the Station at reasonable times, provided that the normal operations of Seller's business shall not be disrupted. In addition, Seller shall deliver to Buyer copies of all of the Station's monthly operating statements and monthly sales reports, as may exist; and furnish such additional information concerning the Station as Buyer may from time to time reasonably request. Notwithstanding the foregoing, Buyer shall not communicate with Seller's customers without Seller's advance written consent. 12 6.2 CONDUCT OF STATION BUSINESS. Between the date hereof and Closing: 6.2(a) Seller shall make all reasonable efforts to produce the consent of any third parties necessary for the assignment to Buyer of any contract, lease or agreement marked with an asterisk and listed on the Contract Schedules; 6.2(b) Seller shall (i) conduct the business of the Station in a prudent and responsible manner in good faith and operate and maintain the Station and the Assets in accordance with good engineering and Seller's past practices and in compliance with the terms of the Licenses and Applicable Laws; (ii) keep all of the Assets to be transferred hereunder in substantially the same operating condition and repair as of the date hereof, reasonable wear and tear excepted; and (iii) use all reasonable efforts to preserve the customers, goodwill and business reputation of the Station; 6.2(c) Seller shall not outside the ordinary course of business (i) hire additional personnel or unreasonably increase the compensation or bonuses payable to any of the Station's employees; (ii) enter into an agreement to sell, assign, lease, exchange or otherwise transfer or dispose of any of the Assets; (iii) enter into any new contract or renegotiate, modify, amend, renew, or terminate any existing contract, except that Seller may, in the ordinary and usual course of business, enter into: (1) agreements for the sale of time on the Station for such rates and on such terms as are consistent with Seller's normal and usual practices; (2) any contract(s) terminable on thirty (30) days notice or less without premium or penalty; or (3) any contract(s) consented to by Buyer in writing; (iv) change the Station's call letters, or change the Station's facilities, or apply to the FCC for any construction permit(s) (except that this limitation shall not apply to an application for extension of time to construct under a construction permit outstanding as of the date of this Agreement, without Buyer's consent, which will not be unreasonably withheld or delayed, or make any material adverse changes in the Station's leasehold improvements and other improvements and fixtures; or (v) except as required by law or any governmental agency, disclose any information relating to the Station to any third party, other than to Seller's authorized employees, agents and professional advisors in the ordinary course of business and other than to Buyer and Buyer's authorized representatives as provided for herein; 6.2(d) Seller shall maintain in full force and effect the insurance described in SCHEDULE 4.9; and 6.2(e) Seller shall give Buyer notice of any unusual operating problems or developments affecting Seller between the date hereof and the Closing Date, including, but not limited to, any problem or development which would materially adversely affect the Assets, and keep Buyer fully apprised of all matters having material financial impact on Seller. 13 6.3 BUYER'S INSPECTIONS AND APPROVALS. 6.3(a) Seller agrees to convey and Buyer agrees to accept such title to the Fee Property as the title company shall be willing to insure on its standard from and at standard rates, such title to be subject to (i) all standard exclusions and printed exceptions in the standard form of owner's policy of title insurance; (ii) encroachments and all other matters that would be disclosed by a current and accurate survey of the Fee Property; (iii) liens for taxes and assessments not yet due and payable; (iv) easements for public utilities affecting the Fee Property; (v) all easements, covenants, restrictions and rights-of-way affecting the Fee Property; and (vi) both (a) any applicable zoning ordinances, other land use laws and regulations, and (b) those matters, if any, which are waived by Buyer pursuant to this Paragraph 6 ( the foregoing title matters are hereinafter referred to as the "Permitted Title Exceptions"). Within thirty (30) days of the Closing Date, the Buyer shall order, at Buyer's sole cost and expense, a title commitment from a title insurance company authorized to do business in the Commonwealth of Pennsylvania (the "Commitment"). If the Commitment reveals a defect in title which is not one of the Permitted Title Exceptions, or if prior to the Closing Date a defect in title arises after the date of the Commitment, either of which defect is not one of the Permitted Title Exceptions, Buyer may either waive such defect or give prompt (within ten (10) days of receipt of such commitment or endorsement (time being of the essence) written notice to Seller of such defect in title, whereupon Seller shall attempt to cure such defect prior to the Closing. If Seller is unable or unwilling to cure, on or before the Closing Date, any defect as to which Buyer has notified Seller as hereinabove provided and if Buyer does not waive such defect, this Agreement may be terminated, at the Buyer's sole option, the Escrow Amount shall be returned to Buyer, and thereafter neither party shall have any liability or obligation to the other pursuant to this Agreement except for those obligations specifically stated to survive cancellation or termination. If Seller is unable or unwilling to cure, on or before the Closing Date, any defect as to which Buyer has notified Seller as hereinabove provided and if Buyer does not waive such defect, Buyer shall use such portion of the Purchase Price on the to pay or discharge any liens or encumbrances that are not Permitted Title Exceptions or waived by Buyer, and shall deliver to Buyer at Closing instruments in recordable form and sufficient to satisfy such liens or encumbrances of record, together with the cost of recording or filing said instruments. If agreed by Buyer, at Buyer's sole option, Seller may deposit sufficient monies with Buyer's title company acceptable to and required by it to assure their discharge, but only if the title company will insure title to the Fee Property clear of such matters or insure against their enforcement out of the Fee Property. 6.3(b) ENVIRONMENTAL AUDIT. Buyer shall perform, at its expense, such environmental investigations and audits (an "Audit") of the Real Property as it deems appropriate, including, without limitation (i) conditions with respect to contamination or 14 pollution of surface or ground waters, soil and air, (ii) the disposal, presence, release or threat of release of hazardous or toxic material thereon, and (iii) compliance with environmental laws or other Applicable Laws. If the Audit discloses a condition which materially contradicts the representations in Section 4.6(c), Buyer may, at its sole option, either: (1) Elect to consummate the purchase of all the Assets in which case Seller shall bear the cost of remediating such condition in an amount not to exceed $25,000 and such amount shall be deducted from the Purchase Price; or (2) Terminate this Agreement, in which case the Escrow Amount shall be returned to Buyer, and thereafter neither party shall have any liability or obligation to the other pursuant to this Agreement except for those obligations specifically stated to survive cancellation or termination. 6.3(c) ENGINEERING INSPECTION. It is agreed that within ten (10) days prior to the Closing Date, Buyer's engineer may inspect the property transferred to insure that the equipment complies with all warranties and conditions set forth herein. Seller agrees to extend full cooperation to said engineer, including such access to the equipment and to logs pertaining thereto at such time or times as said engineer shall reasonably request. If Buyer's engineer reports that the equipment fails to comply with said warranties, and Seller disputes the report, Buyer and Seller shall jointly hire and pay a consulting engineer to give a report on the disputed item(s). The consulting engineer's report shall be final, and Seller shall repair any equipment that the consulting engineer reports does not meet the warranty set forth in Subsection 4.2(b) prior to the Closing; provided, however, Seller's obligation to repair shall not exceed Fifteen Thousand Dollars ($15,000). If the repairs required exceed such amount and Seller refuses to make such repairs in excess of the cap, Buyer may, at its sole option, either proceed with this Agreement or terminate this Agreement and have the Escrow Amount returned to it. 6.4(a) RISK OF LOSS/ASSETS. The risk of any loss, damage or destruction to any of the Assets from fire or other casualty or cause shall be borne by the Seller at all times prior to 12:01 a.m. on the Closing Date. Upon the occurrence of any loss or damage to any material portion of the Assets as a result of fire, casualty or other cause prior to Closing, Seller shall notify Buyer of same in writing immediately, stating with particularity the extent of such loss or damage incurred, the cause thereof if known, and the extent to which restoration, replacement and repair of the Assets lost or destroyed will be reimbursed under any insurance policy with respect thereto. Subject to the provisions hereof, Buyer shall have the option (but not the obligation), in the event the loss or damage exceeds One Hundred Thousand Dollars ($100,000.00) and the property cannot be substantially repaired or restored within one hundred twenty (120) days, exercisable within ten (10) days after receipt of such notice from Seller to: (i) postpone the Closing until such time as the property has been completely repaired, 15 replaced or restored, unless the same cannot be reasonably effected within two (2) months of notification; (ii) elect to consummate the Closing and accept the property in its "then" condition, in which event Seller shall at the Closing assign all rights under any insurance claim covering the loss and pay over any proceeds under any such insurance policy theretofore received by Seller with respect thereto; or (iii) rescind this Agreement at no cost or expense to Buyer and declare the Agreement of no further binding force and effect, if such repairs, replacements or restorations are not completed within ninety (90) days after the date specified herein as the Closing Date, provided that such repairs, replacements or restorations are necessary to the normal operation of the Station. In the event Buyer elects to postpone the Closing Date as provided in clause (i) of this Subsection, the parties hereto will cooperate to extend the time during which this Agreement must be closed as specified in the consent of the FCC referred to herein. 6.5 CONFIDENTIALITY. Between the date of this Agreement and the Closing Date, Buyer will continue to maintain strict confidentiality with respect to all documents and information furnished by or on behalf of Seller (except for documents of information required to be disclosed by law; subject to Seller's right to contest such requirement), and, if this Agreement is terminated, Buyer shall return to Seller all such documents and information. Notwithstanding the foregoing, Buyer may make disclosure that may be required: (i) by its lenders; (ii) pursuant to any federal or state securities laws; or (iii) as may be necessary to advise any of Buyer's investors or advisors; provided, that, in such case, Buyer shall advise the investors of the confidentiality of the information, who must, as a condition of receiving such information, agree to keep such information confidential. 6.6 PROHIBITED ACTION. Between the date of this Agreement and the Closing Date, neither Buyer nor Seller will commit any act or omission that would: (i) disqualify them as parties to an assignment of the Licenses or, as to Buyer, as owner or operator of the Station and the Assets; (ii) jeopardize the validity of the Licenses; or (iii) interfere with the existing relationships between the Station and its advertisers, suppliers and others. 7. APPLICATION FOR FCC APPROVAL. 7.1 FILING AND PROSECUTION OF APPLICATION. No later than 90 days prior to the expiration of the Time Brokerage Agreement executed contemporaneously herewith, Buyer and Seller shall join in an application to the FCC requesting the FCC's written consent to the assignment of the Licenses of the Station to Buyer and to the consummation of the transactions contemplated by this Agreement ("Application"). Both parties shall promptly respond to any requests for the submission of additional information and shall vigorously oppose any protests, petition to deny, petition for reconsideration or appeal of the FCC's consent and approval that may be filed. Buyer and Seller shall proceed with due diligence and promptly take all steps necessary to the 16 expeditious prosecution of such application to a favorable conclusion, using their best efforts throughout. 7.2 EXPENSES. Each party shall bear its own expenses in connection with the preparation of the applicable sections of the Application and in connection with the prosecution of such application. Seller and Buyer will divide and pay equally the license transfer application fees charged by the FCC, provided that Seller's share shall not exceed $725. 7.3 EXTENSION OF CLOSING DATE. If for any reason, the application is not approved within 90 days, the date for closing will be extended until the application is finally approved or denied (which is hereby defined to be a final order denying the application which is not subject to appeal) and the Time Brokerage executed contemporaneously herewith will be extended a like amount of time and only when or if the application is finally denied, then either party may, if not then in default, have the right by written notice 15 days in advance to terminate this Agreement. 7.4 CONTROL OF STATION. This Agreement shall not be consummated until the FCC has given its written consent to the assignment of the Licenses of the Station. Buyer shall not, directly or indirectly, control, supervise, direct or attempt to control, supervise or direct the operation of the Station prior to Closing, but such operation shall be the sole responsibility of the Seller. Both the Seller and Buyer agree that the Seller has retained no rights of reversion of the WJHR-AM license, and no right to the reassignment of the WJHR-AM license in the future, and has not reserved the right to use the facilities of WJHR-AM in the future for any reason whatsoever. 7.5 BEST EFFORTS. Each party hereto agrees to use its best efforts in the performance and fulfillment of all terms and conditions of this transaction applicable to such party and in filing an application for the FCC's consent, and agrees to execute such other and further documents as may be reasonably required to carry out the intent of this Agreement. 8. BULK SALES LAW. Buyer hereby waives compliance by Seller with the provisions of all Bulk Sales Laws, or other similar provisions, provided, however that Seller agrees to indemnify and hold Buyer harmless for any claims arising thereunder, except for the Accounts Payable assumed by Buyer hereunder. 9. OBLIGATIONS UNDER CONTINUING CONTRACTS. 17 Buyer shall execute and deliver to Seller at the Closing an assumption by Buyer of Seller's obligations for the period on and after the Closing or as to the assumed Accounts Payable prior to Closing under (i) the continuing contracts, leases and agreements described in Section 1.1(e) and 1.1(f) hereof; (ii) all contracts described in Section 1.1(f) hereof; (iii) Accounts Payable outstanding on the Closing Date; and (iv) all other continuing contracts theretofore entered into by the Seller permitted by the terms hereof in the regular course of its business; all to the extent transferable. From and after the Closing Date, Buyer shall perform all obligations under said contracts, leases and agreements, and shall indemnify and hold harmless Seller from any and all claims, liabilities and obligations, losses, damages or expenses arising out of said contracts, agreements and leases accruing by reason of matters occurring on and after the Closing Date. Except for the Assumed Obligations, Seller shall remain liable for, and shall indemnify and hold harmless Buyer from, any and all claims, liabilities, obligations, losses, damages or expenses accruing by reason of matters occurring prior to the Closing Date under said contracts, agreements and leases. 10. CLOSING. Subject to the terms and conditions herein stated, the parties agree as follows: 10.1 CLOSING DATE. The Closing of the transactions contemplated herein shall be held on a date in time as specified by the Buyer in writing to the Seller that is no more than ten calendar (10) days after the date upon which the approval of the FCC required for the consummation of the transactions contemplated herein shall become a "Final Order," but the Closing Date shall be no later than November 18, 2001, or a later date as specified in Section 7.3 on which Buyer and Seller mutually agree, provided, however, that "Final Order" means an action by the FCC or its staff which is no longer subject to administrative or judicial review, reconsideration or appeal. The Closing shall take place at the Trenton offices of Sterns & Weinroth at 10:30 a.m. local time, or at such other time or place as mutually agreed. In the event the parties are unable to complete the Closing on or before the date otherwise provided in this Section 10.1, either party may request a brief extension (up to five business days) of that date and the other party shall not unreasonably withhold its consent to such extension, provided that the party requesting such extension is not already in default under the terms of this Agreement. Buyer or Seller may, with the consent of the other, waive the requirement that the Commission's approval of the Application shall have become a Final Order prior to the Closing Date in order to proceed with the Closing, but agree that if closing takes place prior to the approval becoming a "Final Order", the Unwind Agreement attached hereto and marked EXHIBIT B shall be executed. 10.2 SELLER'S OBLIGATIONS AT CLOSING. At the Closing, Seller shall execute and deliver or cause to be delivered to Buyer the following, in a form and substance reasonably approved by counsel for Buyer: 18 10.2(a) A Bill of Sale for all tangible personal property to be transferred hereunder, pursuant to Section 1.1(b), containing a warranty of title and covenant against all liens, encumbrances and restrictions of any kind whatsoever. 10.2(b) A duly acknowledged bargain and sale deed with covenants against grantor's acts conveying the Real Property to Buyer. 10.2(c) One or more assignments assigning to Buyer the Licenses and intangible property to be acquired by Buyer hereunder; 10.2(d) One or more assignments assigning to Buyer the Contracts to be assigned to Buyer hereunder together with all necessary consents thereto and the original copies of said Contracts; 10.2(e) A certificate from Seller stating that: (i) all representations and warranties of Seller as set forth in this Agreement or in any statement, certificate, schedule, exhibit or other document delivered pursuant to this Agreement by Seller are true and correct in all material respects, as of the Closing Date; and (ii) Seller has, in all material respects, performed and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by Seller at or prior the Closing Date; 10.2(f) An opinion of Shook, Hardy & Bacon, LLP, counsel for Seller, in the form attached hereto as EXHIBIT C, on matters other than FCC Matters; 10.2(g) OPINION OF SELLER'S FCC COUNSEL. An opinion of Shook, Hardy & Bacon, LLP in the form attached hereto as EXHIBIT D; - 10.2(h) FILES & RECORDS. Copies of all of the files, records and logs referred to in Sections 1.1(i) and 1.1(j) hereof and copies of all of the Licenses; 10.2(i) OTHER DOCUMENTS. Such other documents or instruments as counsel for Buyer may reasonably request and in a form reasonably acceptable to Buyer's counsel, which documents are necessary to carry into effect the provisions of this Agreement. 10.3 BUYER'S OBLIGATIONS AT CLOSING. At the Closing, Buyer shall execute and deliver or cause to be delivered to Seller the following in a form and substance reasonably acceptable to Seller's counsel: 10.3(a) The Purchase Price as set forth in Section 2 of this Agreement consisting of: (i) Executed instructions to the Escrow Agent directing it to release to Seller the Escrow Amount in the amount of One Hundred Thirty Thousand Dollars ($130,000) and any interest earned on the escrow; and (ii) Two Million Three Hundred 19 Seventy Thousand Dollars ($2,370,000), including any sums for the real estate, if applicable, as described in Section 1.1(c) as the balance of the Purchase Price, less any amount of interest earned on the escrow, payable by wire transfer; 10.3(b) One or more assumptions assuming the Contracts and Accounts Payable being assigned by Seller; 10.3(c) A certificate from Buyer stating that: (i) all representations and warranties of Buyer as set forth in this Agreement or any statement, certificate, or other document delivered pursuant to this Agreement by Buyer are true and correct in all material respects as of the Closing Date; and (ii) Buyer has, in all material respects, performed and complied with all covenants, agreements, and conditions required by this Agreement to be performed or complied with by Buyer at or prior to the Closing Date; 10.3(d) OTHER DOCUMENTS. Such other documents or instruments as counsel for Seller may reasonably request and in a form acceptable to Seller's counsel, which documents are necessary to carry into effect the provisions of this Agreement. 10.4 CONDITION TO OBLIGATIONS OF BUYER. The obligation of Buyer to consummate the purchase of the Assets at the Closing shall be subject to the performance, in all material respects, on or prior to the Closing Date, of all of the covenants and agreements as set forth elsewhere in this Agreement to be performed by Seller, and upon the following additional conditions: 10.4(a) The representations and warranties of Seller shall be true in all material respects as of the Closing Date; and 10.4(b) There shall not have occurred any material adverse change in the condition of the Assets; and 10.4(c) The consents required from all governmental agencies (including, without limitation, unless waived, the Final Order of the FCC) to Buyer's acquisition of the Assets shall have been granted, without any condition materially adverse to Buyer, and such consents shall be valid and outstanding on the Closing Date; and 10.4(d) No action or proceeding shall be pending, challenging the validity of this Agreement or seeking to delay the consummation of any of the transactions for which this Agreement provides, which in the reasonable opinion of Buyer is material to the transactions contemplated by this Agreement; and 10.4(e) All equipment to be transferred hereunder (i) is in reasonably good working order; (ii) is in material compliance with all applicable FCC Rules and Regulations; and (iii) has passed the engineering review set forth in Section 6.3(c); and 20 10.4(f) Seller shall have in all material respects performed and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by it prior to and on the Closing Date; and 10.4(g) All of the requirements of Section 10.2 shall have been met. Buyer shall have the right to waive any or all of the foregoing conditions of Closing at its sole option and risk. 10.5 CONDITION TO OBLIGATIONS OF SELLER. The obligation of Seller to consummate the sale of the Assets at the Closing shall be subject to the performance, in all material respects, on or prior to the Closing Date, of all of the covenants and agreements as set forth elsewhere in this Agreement to be performed by Buyer, and upon the following additional conditions: 10.5(a) The representations and warranties of Buyer shall be true in all material respects as of the Closing Date; and 10.5(b) The consents required from all governmental agencies (including, without limitation, unless waived, the Final Order of the FCC) to Buyer's acquisition of the Assets shall have been granted, without any condition materially adverse to Seller, and such consents shall be valid and outstanding on the Closing Date; and 10.5(c) Buyer shall have in all material respects performed and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by it prior to and on the Closing Date; and 10.5(d) All of the requirements of Section 10.3 shall have been met. Seller shall have the right to waive any or all of the foregoing conditions of Closing at its sole option and risk. 10.6 FURTHER ASSURANCE. From time to time, upon request and without further consideration on or after the Closing Date, Seller and Buyer will execute and deliver such other instruments of conveyance and transfer and take such other action as may be reasonably required more effectively to convey, transfer to and vest in the Buyer, and to put the Buyer in possession and operating control of, any part of the Assets, and, in the case of contracts and rights, if any, which cannot be transferred effectively without the consent of third parties which is unobtainable, to use good faith efforts to secure to the Buyer the benefits thereof. 11. OTHER CLOSING OBLIGATIONS. 21 11.1 PRORATIONS. Except as otherwise provided herein, the Buyer, by virtue of its obligation specified in the Time Brokerage Agreement executed even date herewith, shall be entitled to all income earned prior to and after the Closing Date and shall similarly be responsible for reimbursement of all liabilities and obligations incurred or payable in connection with the operation of the station from the date of the Time Brokerage Agreement to the Closing Date and thereafter. 11.1 (a) For reimbursement, real and personal property taxes and utility charges relating to the Station; and 11.1 (b) For reimbursement, FCC annual regulatory fees payable in 2001. Within thirty (30) days after the Closing, Buyer shall deliver to Seller a statement setting forth in reasonable detail the basis for prorations pursuant to this Section, and Buyer shall pay to Seller, or Seller shall pay to Buyer, as the case may be, any net amount due as the result of the proration statement (or, if there is a dispute, the undisputed amount thereof. If Seller disputes Buyer's determinations, or, if at any time after delivery of Buyer's statement of determinations any party determines that any item included in the proration is inaccurate or that an additional item should be included in the prorations, the parties shall confer with regard to the matter and an appropriate adjustment and payment shall be made as agreed upon by them or, if they are unable to resolve the matter, by a firm of independent certified public accountants mutually agreeable to the parties, whose decision on the matter shall be binding and whose fees and expenses shall be borne equally by them. Under the supervision of Buyer, Seller shall, in a manner consistent with past practices, collect all accounts receivable after the Closing Date and shall promptly pay all commissions, bonuses and other sales related expenses, and shall provide Buyer with an accounting of all collected and uncollected accounts receivable. Buyer shall have no obligation to pursue such collections. 11.2 FEES, SALES AND TRANSFER TAXES. All filing and recording fees in connection with any instrument of conveyance or transfer delivered pursuant to this Agreement shall be paid by Buyer. Transfer taxes, if any, with the personal property and intangible assets sold and transferred hereunder shall be paid by Buyer. Transfer taxes in respect to the real property sold and transferred hereunder shall be paid by Seller. Sales taxes, if any, in respect to the Assets sold and transferred hereunder shall be paid by Buyer. Buyer shall pay the premium for a standard owner's policy of title on the Fee Property; if Buyer desires an ALTA Policy, Buyer shall pay the additional premium therefor. 11.3 OTHER TAXES. Any and all sales taxes, unemployment insurance and social security taxes, and all other taxes due any state, federal or local government by Seller on or before the Closing Date shall be paid by Seller when due. 22 12. ALLOCATION OF PURCHASE PRICE. The purchase price shall be allocated among the Assets in accordance with EXHIBIT D hereto. Each of the parties hereto agrees to prepare and file its tax returns reflecting the allocations in a manner consistent with this Agreement, including preparation and filing of IRS Form 8594. 13. INDEMNIFICATION. 13.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All covenants and agreements pertaining to matters to be performed after Closing and all representations and warranties contained in this Agreement shall survive for a period not to exceed three (3) years after the Closing Date ("Survival Period") except that the representations and warranties with respect to title shall continue indefinitely. (This provision does not include title to the Fee Property.) No claim may be brought under this Agreement or with respect to the transactions described herein unless written notice describing in reasonable detail the nature and basis of such claim is given in good faith on or prior to the last day of the Survival Period. In the event such notice is so given, the right to indemnification with respect thereto under this Section 13 shall survive the Survival Period until such claim is finally resolved and any obligations with respect thereto are fully satisfied. 13.2 INDEMNITY BY SELLER. Subject to 13.1, Seller agrees to pay and discharge and to save and protect Buyer and its officers, directors, shareholders and affiliates free and harmless from all obligations, claims and demands (including reasonable attorneys fees incurred by Buyer with respect thereto) (collectively "Seller's Obligations") against, arising out of or in connection with (a) any lease, contract or other agreement of Seller not required to be assumed by Buyer pursuant to this Agreement; (b) the ownership of the Station and the Assets that shall arise or accrue prior to the Closing (except for the Assumed Obligations) and (c) any material breach or violation by Seller of any covenant, agreement or warranty herein contained, or the inaccuracy of any representation. of Seller made in this Agreement. 13.3 INDEMNITY BY BUYER. Subject to 13.1, Buyer agrees to pay and discharge and to save and protect Seller and its officers, directors, shareholders and affiliates free and harmless from all obligations, claims, and demands (including but not limited to attorneys fees incurred by Seller with respect thereto) against, arising out of or in connection with (a) any lease, contract, Accounts Payable or other agreement of Seller required to be to be assumed by Buyer pursuant to this Agreement; (b) that shall arise or accrue against or in connection with the ownership or operation of the Station and the Assets from and after the Closing; and (c) any material breach of violation by Buyer of any covenant, agreement or warranty herein contained or the inaccuracy of any representation of Buyer made in this Agreement. 23 13.4 INDEMNIFICATION PROCEDURE, RIGHT OF OFFSET. In the event that any party hereto asserts a claim for indemnification hereunder, such party seeking indemnification shall give written notice to the indemnifying party specifying the nature and the amount, if known, of the claim asserted. The indemnifying party shall then have the right, using counsel reasonably satisfactory to the party seeking indemnification, to investigate, secure, contest or settle the claim alleged by such i third party (hereinafter called a .. contest"), provided that the party seeking indemnification may participate voluntarily, at its own expense, in any such contest through representatives and counsel of its own choice, and, provided further, that any such action by the indemnifying party relating to the contest shall be without prejudice to the party seeking indemnification. Except as provided otherwise in the immediately preceding sentence, and subject to 13.1, the indemnifying party shall bear all costs of such contests and shall indemnify and hold the party seeking indemnification harmless against and from all costs, fees, and expenses of such contest. Unless and until the indemnifying party elects to prosecute the contest, the party seeking indemnification shall have the full right, at its option, to do so and to look to the indemnifying party under the provisions of this Agreement for the amount of the costs, if any, of prosecuting the contest. The failure of the indemnifying party to respond in writing to the aforesaid notice of the party seeking indemnification with respect to such contest within twenty (20) days after the receipt thereof shall be deemed an election not to prosecute the same. If the indemnifying party fails to prosecute the contest and the party seeking indemnification does not prosecute the contest or does so and the decision is rendered against it, the amount paid by the party seeking indemnification to the third party in settlement or satisfaction of the contest shall be deemed a valid claim hereunder. In the event that the contest involves any Seller's Obligations, Buyer shall have the right to offset the amount of the costs, if any, incurred by Buyer in prosecuting the contest together with any sums owed in connection with the resolution or settlement thereof against amounts which may be owed by Buyer to Seller. The parties hereto shall make mutually available to each other all relevant information in their possession relating to any such contest and shall cooperate in the defense thereof. 14. TERMINATION BEFORE CLOSING; DEFAULT AND REMEDIES. 14.1 TERMINATION BEFORE CLOSING. If Closing shall not have previously occurred, this Agreement may be terminated: 14.1(a) If the Closing has not occurred prior to the time provided for in Section 10.1; 14.1(b) Pursuant to Section 7.3 hereof; 24 14.1(c) By Buyer, upon the occurrence of a Seller's Event of Default (as defined in Section 14.2(a)), upon failure of a condition precedent to Buyer's obligation to close set forth in Section 10.4 or upon failure of a condition precedent to Seller's obligation to close set forth in Section 10.5(c) or 10.5(e); 14.1(d) By Seller, upon the occurrence of a Buyer's Event of Default (as defined in Section 14.2) or upon failure of a condition precedent to Seller's obligation to close set forth in Section 11. 5. In the event of termination pursuant to Section 14.1(d) above upon the occurrence of a Buyer's Event of Default as defined in Section 14.2, Seller shall be entitled to retain the Escrow Amount as liquidated damages as provided in Section 2.2 hereof. In the event of termination of this Agreement for any other reason, Buyer shall be entitled to return of the Escrow Amount as provided in Section 2.2 hereof. 14.2 DEFAULT AND REMEDIES 14.2(a) The occurrence of any one or more of the following events shall constitute a material default of this Agreement by Buyer ("Buyer's Event of Default"): (i) The material breach of any representation or warranty by Buyer hereunder unless such breach is cured prior to the Closing Date; (ii) The failure by Buyer to timely consummate the transactions contemplated by this Agreement in violation of the provisions of this Agreement; (iii) The failure by Buyer to perform any other of its material obligations under this Agreement, where such failure shall continue for a period of ten (10) days after delivery of written notice of demand therefor from Seller to Buyer; provided, however, that if more than ten (10) days are reasonably required to cure such failure, then Buyer shall not be deemed to be in default thereof if Buyer, in good faith, has commenced such cure within said ten (10) day period and thereafter diligently prosecutes such cure to completion and completes such cure prior to Closing. 14.2(b) The occurrence of any one or more of the following events shall constitute a material default of this Agreement by Seller ("Seller's Event of Default"): (i) The material breach of any representation or warranty by Seller hereunder unless such breach is cured prior to the Closing Date; (ii) The failure by Seller to timely consummate the transactions contemplated by this Agreement in violation of the terms of this Agreement; 25 (iii) The failure by Seller to perform any other of its material obligations under this Agreement, where such failure shall continue for a period of ten (10) days after delivery of written notice of demand therefor from Buyer to Seller; provided, however, that if more than ten (10) days are reasonably required to cure such failure, then Seller shall not be deemed to be in default thereof if Seller, in good faith, has commenced such cure within said ten (10) day period and thereafter diligently prosecutes such cure to completion and completes such cure prior to Closing. 14.2(c) Seller acknowledges that the Station is of a special, unique, and extraordinary character, and that any breach of this Agreement by Seller could not be compensated for by damages. Accordingly, upon the occurrence of a Seller's Event of Default, Buyer shall be entitled, provided that a Buyer's event of default has not occurred, in addition to any other remedies that it may have, to enforcement of this Agreement (subject to obtaining any required approval of the FCC) by a decree of specific performance or injunctive relief requiring Seller to fulfill its obligations under this Agreement. In any action to specifically enforce Seller's obligation to close the transaction contemplated by this Agreement, Seller shall waive the defense that there is an adequate remedy at law or in equity and agrees that Buyer shall be entitled to obtain specific performance of Seller's obligation to close hereunder without being required to prove actual damages. As a condition to seeking specific performance, Buyer shall not be required to tender the Purchase Price, but shall be required to demonstrate that Buyer is ready, willing and able to tender the Purchase Price and consummate the purchase of the Station as contemplated hereunder. 15. ARBITRATION. Any controversy or claim arising out of or relating to this Agreement or any of its Exhibits, or the breach thereof shall be settled by arbitration by one (1) arbitrator (unless the parties mutually agree to accept multiple arbitrators) in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator(s) may be entered in any court having jurisdiction thereof. The cost of any such arbitration shall be borne equally by the parties involved unless the arbitrator(s) deem such division of costs to be inequitable, in which event the arbitrator(s) may allocate the costs of arbitration among the parties thereto as they deem just and equitable under the circumstances. 16. ACCESS TO BOOKS AND RECORDS. After the Closing Date, Buyer and Seller shall each allow the other reasonable access during normal business hours upon reasonable prior notice to their respective books and records pertaining to the operation of the Station prior to the Closing Date and shall retain such records for a period of not less than three (3) years after the Closing Date. 26 17. NOTICES. All notices and other communications hereunder shall be in writing and be deemed to have been duly given if delivered personally or by overnight courier or sent by telecopy (and confirmed by regular mail) or mailed by registered mail, postage prepaid, addressed as follows: (a) If to Seller, to: Multicultural Radio Broadcasting, Inc. 449 Broadway New York, New York 10013 Attention: Arthur Liu, President with a copy to: Mark N. Lipp, Esq. Shook, Hardy & Bacon, LLP 801 Pennsylvania Avenue, NW Suite 600 Washington, DC 20004 (b) If to Buyer, to: Nassau Broadcasting Partners, L.P. 619 Alexander Road, Third Floor Princeton, New Jersey 08540 Attention: Louis F. Mercatanti, Jr. with a copy to: Mark D. Schorr, Esq. Sterns & Weinroth A Professional Corporation 50 West State Street, Suite 1400 P.O. Box 1298 Trenton, New Jersey 08607-1298 or such other address with respect to any party hereto as such party may from time to time notify (as provided above) to the other party hereto. Any such notice, demand or communication shall be deemed to have been given (i) if mailed, as of the close of the third business day following the date so mailed, and (ii) if personally delivered or 27 otherwise sent as provided above, on the date delivered or sent if sent by telecopy and on the next business day after the date sent in all other cases. 18. CONTROL OF STATION. Between the date of this Agreement and the Closing Date, Buyer shall not control, manage or supervise the operation of the Station or the conduct of the Station's business, all of which shall remain the sole responsibility and under the control of Seller, provided that this Section 19 shall not be deemed to be consent by Buyer to Seller's noncompliance (if any) with this Agreement. 19. EXPENSES. Unless otherwise agreed to in writing by the parties hereto, each party shall pay its own costs and expenses, including any and all legal and accounting fees, of its performance and compliance with all conditions and agreements contained herein on its or their part to be performed or complied with. 20. BROKERS. Buyer and Seller each represent to the other that there is no finder, consultant or broker involved in this transaction and that they have not agreed to pay any other finder, consultant or broker fee in connection with this transaction. If any other finder, consultant or broker claims a fee, the party whose actions led to that claim will bear sole responsibility for paying or settling that claim and shall indemnify the other party against the same. 21. SECTION HEADINGS. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 22. ENTIRE AGREEMENT; FILINGS. (a) This Agreement and all Schedules and Exhibits attached hereto constitute the entire agreement of the parties with respect to the subject matter hereof and supersede all prior understandings and agreements among the parties, whether oral or written, contain the entire understanding of the parties and shall not be changed, modified, amended, extended, terminated, waived or discharged except by subsequent instrument in writing signed by the parties hereto. To the extent permitted by the FCC, the Schedules shall not be filed with the FCC or otherwise disclosed or made public. (b) Buyer and Seller acknowledge that this Agreement was executed before the preparation of the required schedules and Exhibits could be completed. Buyer and 28 Seller agree that Buyer's obligation to perform under this Agreement is subject to Buyer's review and approval of each Schedule and Exhibit which Seller is required to provide under the terms of the Agreement. 23. COUNTERPARTS. This Agreement may be signed upon any number of counterparts with the same effect as if the signature to each counterpart were on the same instrument. 24. SURVIVAL. The provisions hereof, which by their terms are to be performed or observed after the Closing Date, shall survive the Closing hereunder in accordance with the terms of this Agreement and shall be binding upon and inure to the benefit of all of the parties hereto, their heirs, legal representatives, successors and assigns. 25. CONFIDENTIALITY. Neither party shall make any announcement or disclose to the press or others without the other party's consent as to timing and content (which shall not be unreasonable withheld or delayed), as to the purchase/sale of the Station prior to the Closing. It is understood that the foregoing non-disclosure requirement is not intended to preclude Seller from complying with the FCC's public notice requirements or Buyer from having discussions with financial entities, consultants and attorneys outside the Station who will also be advised of the need and agreement for deferred disclosure and shall agree to such confidentiality and deferred disclosure. 26. ASSIGNABILITY. Neither the Agreement nor any rights or obligations hereunder may be assigned by Buyer or Seller without the express prior written consent of the other party, except that Buyer shall be permitted to assign this Agreement ot an entity controlled by Louis F. Mercatanti, Jr.. Except as provided otherwise herein, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the parties. 27. GOVERNING LAW. This Agreement shall be governed by, construed (both as to validity and performance) and enforced in accordance with the laws of the State of New Jersey applicable to agreements made and to be performed wholly within such jurisdiction. 28. ATTORNEYS' FEES. 29 In the event of commencement of either arbitration or suit by either party to enforce the provisions of this Agreement, the prevailing party shall be entitled to receive such attorneys' fees and costs as may be adjudged reasonable in addition to any other relief granted. 29. SEVERABILITY. Any provision of this Agreement which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such unenforceability without invalidating the remaining provisions hereof, and any such unenforceability in any jurisdiction shall not invalidate or render unenforceable such provisions in any other jurisdiction. To the extent permitted by applicable law, the parties hereto hereby waive any provision of law now or hereafter in effect which renders any provision hereof unenforceable in any respect. 30. FURTHER ACTIONS. From time to time before, at and after the Closing, each party, at the requesting party's expense and without further consideration, will execute and deliver such documents to the other party as the other party may reasonably request in order more effectively to consummate the transactions contemplated hereby. IN WITNESS WHEREOF, this Asset Purchase Agreement has been duly executed by the parties hereto as of the date first above written. MULTICULTURAL RADIO BROADCASTING, INC. By: /s/ Arthur Liu ------------------------------------------ Arthur Liu, President NASSAU BROADCASTING PARTNERS, L.P. BY: NASSAU BROADCASTING PARTNERS, INC. ITS GENERAL PARTNER By: /s/ Louis F. Mercatanti, Jr. ------------------------------------------ Louis F. Mercatanti, Jr., President 30 EX-2.6 7 0007.txt ASSET PURCHASE AGMT DTD 8/30/1996 Exhibit 2.6 ASSET PURCHASE AGREEMENT THIS AGREEMENT is made and entered into this 30th day of August, 1996, by and between Great Scott Broadcasting Ltd., a Pennsylvania limited partnership ("Seller"), and Nassau Broadcasting Partners, L.P., a Delaware limited partnership ("Buyer"). STATEMENT OF FACTS 1. Seller is the licensee and operator of radio stations WTTM/AM and WCHR/FM licensed to Trenton, New Jersey (the "Stations"). 2. Subject to the consent of the Federal Communications Commission ("FCC"), Buyer desires to acquire the Stations, and all of the assets, leases, contracts, agreements, licenses, and other property used or useful in the operation of, the Stations, with certain exceptions as provided herein, and Seller desires to transfer such assets to Buyer. NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties intending to be legally bound hereby, agree as follows: 1. SALE AND TRANSFER OF ASSETS. At the Closing and on the date of Real Property Transfer, Seller will sell, assign, transfer and deliver to Buyer the following: 1.1. Assets to be Transferred at Closing. Subject to the terms and ----------------------------------- conditions of this Agreement, on the Closing Date (as defined in Section 10.1), Seller shall sell, convey, assign, transfer and deliver to Buyer, and Buyer shall purchase and accept, all of the business, rights, properties and assets, real and personal, tangible and intangible, of every type and description, owned by Seller and used or held for use in connection with the business and operations of the Stations (except for Real Property and Tower Leases (as described in Schedule 1.2(a) and defined in Section 1.2(b), respectively)) which shall be transferred to Buyer on the Real Property Transfer Date) together with all rights and privileges associated with such assets and business of the Stations, except for Excluded Assets (as defined in Section 1.3) (collectively, the "Assets"). Without limiting the foregoing, the Assets shall include the following: 1.1(a) Licenses and Authorizations. Subject to prior FCC consent, all --------------------------- of the FCC authorizations issued to the Seller with respect to the Stations and their auxiliaries, including without limitation, all rights in and to the call letters WTTM/AM and WCHR/FM, to the extent that they can be conveyed, and all of those FCC authorizations listed and described on Schedule 1.1 (a) attached ---------------- hereto, and all applications therefor, together with any renewals, extensions or modifications thereof and additions thereto or applications filed between the date hereof and the Closing Date (collectively, the "Licenses"). All of Seller's interest in the Licenses will be assigned to Buyer as hereinafter provided; 1.1(b) Tangible Personal Property. All equipment, electrical devices, -------------------------- antennas, cables, vehicles, furniture, fixtures, towers, office materials and supplies, hardware, tools, spare parts, records, tapes, discs, carts and other tangible personal property of every kind and description owned by Seller and used or held for use (including those not in operating condition) located at the premises of the Stations on the Closing Date, and any other tangible personal property not located at said premises and those listed and described on Schedule 1.1(b) attached hereto, or any replacements thereafter acquired prior - --------------- to the Closing Date (except as may be consumed in the ordinary course of business) and including all rights under manufacturers' and vendors' warranties; 1.1(c) Leased Real Property. Any of the leases of real property with -------------------- respect to real property leased by Seller and used or held for use in connection with the business and operations of the Stations on the Closing Date, described on Schedule 1.1(c) (the "Leased Property"); --------------- 1.1(d) Agreements for Sale of Time; Trade/Barter Agreements. Those ---------------------------------------------------- orders and agreements now existing, and still existing on the Closing Date, for the sale of advertising time on the Stations, to the extent of the unexpired portion thereof, for cash as set forth on the attached Schedule 1.1(d)-1 ("Cash ----------------- Agreements"); those orders, agreements and arrangements for the exchange of advertising time, to the extent of the unexpired portion thereof for consideration other than cash ("Trade Out Agreements"), as listed and described in Schedule 1.1(d)-2; all Cash Agreements and all Trade Out Agreements entered ------------------ into in the ordinary course of business between the date hereof and the Closing Date to the extent of the unexpired portion thereof; 1.1(e) Other Contracts. All unexpired contracts, agreements, equipment --------------- leases, arrangements, commitments or understandings, written or oral, except for the Tower Leases and any of the foregoing which expire prior to the Closing Date, described in Schedule 1.1(e) hereto, and any such contracts entered into --------------- in the ordinary course of business between the date hereof and the Closing Date ("Contracts"); 1.1(f) Intangible Rights. Any trademarks, trade names, service marks, ----------------- franchises, patents, jingles, slogans, logotypes and other intangible rights, owned and used or held for use by Seller on the Closing Date in connection with the business and operations of the Stations, including those listed and described on Schedule 1.1(f) hereto (the "Intangibles"), to the extent that ---------------- Seller has the right to use and assign them; 1.1(g) Programming and Copyrights. All programs and programming -------------------------- materials and elements, music libraries and software of whatever form or nature owned by Seller and used or held for use in connection with the business and operation of the Stations on the Closing Date ("Collections"), whether recorded on tape or any other media or intended for live performance, and whether completed or held in production and 2 any related common law and statutory copyrights owned by Seller and used or held for use in connection with the business and operations of the Stations, or licensed or sublicensed to Seller in connection therewith, to the extent that Seller has the right to use and assign them; provided, however, that Collections also used by Seller at other locations may be copied and reserved under this Agreement; 1.1(h) FCC Records. All FCC program logs and other records that relate ----------- to the operation of the Stations as are required to be maintained under the rules and regulations of the FCC, including, but not limited to, an up-to-date and complete local public file; provided that Seller may retain copies of any and all such records indefinitely; 1.1(i) Files and Records. All original files and other records of ----------------- Seller relating to the business and operations of the Stations owned and in the possession of Seller (other than records relating to the partnership nature of Seller such as partnership minutes, partnership tax records, financial books and records and similar partnership and/or combined operations records), including without limitation all available schematics, blueprints, engineering data, customer lists, reports, specifications, projections, statistics, promotional graphics, original art work, mats, plates, negatives and other advertising, marketing or related materials, and copies of all other technical and financial information concerning the Stations and the Assets; 1.1(j) Goodwill. All of Seller's goodwill in, and going concern value -------- of, the Stations; and 1.1(k) Accounts Receivable. Seller's accounts receivable in respect of ------------------- the Stations ("Accounts Receivable"); provided, however, Buyer shall pay to Seller all amounts collected by Buyer for the Accounts Receivable within thirty (30) days following the Closing, without offset or deduction, and Buyer shall, within sixty days following the Closing, provide to Seller, in a form satisfactory to Seller, an accounting of all Accounts Receivable collected. 1.2 Assets to be Transferred After Closing. Subject to the terms and -------------------------------------- conditions of this Agreement, on the Real Property Transfer Date (as defined in Section 10.1), Seller shall sell, convey, transfer and deliver to Buyer, and Buyer shall purchase and accept: 1.2(a) The real property owned by Seller, as described on Schedule 1.2 ------------ (the "Real Property"); provided, however, that between the Closing Date and the Real Property Transfer Date, Seller shall lease the Real Property, including all structures, buildings, towers, transmitters, antennas and other improvements thereon to the Buyer for $1.00 per year pursuant to a lease in the form of Exhibit A, such lease to provide that Buyer shall only have the right to use the broadcast facilities on the Real Property in connection with Buyer's broadcasting operations and Seller shall retain all rights in the Tower Leases during the term of the lease; and 3 1.2(b) All of the revenue, leases and leasing rights with respect to the broadcast towers and transmitter sites as set forth in the attached Schedule -------- 1.2(b) and as entered into in the ordinary course of business between the date - ------ of this Agreement and the Real Property Closing Date ("Tower Leases"). 1.3 Excluded Assets. There shall be excluded from the Assets, and retained --------------- by Seller, to the extent in existence on the Closing Date, the following assets listed in Schedule 1.3 (collectively, the "Excluded Assets"): ------------ 1.3(a) Cash and Investments. All cash on hand or in bank accounts, and -------------------- any and all other cash equivalents, including without limitation, certificates of deposit, commercial paper, treasury bills, asset or money market accounts and all such similar accounts or investments, or notes or other entitlements evidencing loans receivable and any securities owned or held by Seller; 1.3(b) Certain Assets. Pension, profit sharing and savings plan and -------------- trusts and any assets thereof; 1.3(c) Consideration. The consideration delivered by Buyer to Seller ------------- pursuant to this Agreement; 1.3(d) Files and Records. The files and records referred to in the ----------------- parenthetical in Section 1.1(i); 1.3(e) Insurance Policy. All right, title and interest under all ---------------- insurance policies or contracts of insurance and all claims or rights to payment thereunder, including insurance refunds; 1.3(f) Choces in Action. Any and all causes of action and claims of ---------------- Seller arising out of or relating to transactions prior to the Closing Date, including, without limitation, claims for tax refunds; and 1.3(g) Title. Seller's name and rights to the name "Great Scott ----- Broadcasting Ltd." and "Great Scott Communications, lnc." or any variant of the foregoing and all intangible assets directly associated therewith, but not the Intangibles listed on Schedule 1.1(f). 2. PURCHASE PRICE AND PAYMENT. -------------------------- 2.1 Purchase Price. The Buyer shall pay to Seller as consideration for all -------------- of the Assets and Real Property to be sold and bought hereunder pursuant to Section 1, the sum of Twenty Million Dollars ($20,000,000) ("Purchase Price"). 2.2 Earnest Money Deposit; Liquidated Damages. Buyer shall cause to be ----------------------------------------- deposited the sum of Seven Hundred Fifty Thousand Dollars ($750,000) (the "Escrow 4 Amount") with Eizen Fineburg & McCarthy, P.C. (the "Escrow Agent") upon XXXXXX this Agreement. All funds are to be held by Escrow Agent in an interest-bearing XXXXXX until the Closing, as hereinafter defined, with all interest thereon -------- accruing to XXXXX Buyer, pursuant to the terms of an Escrow Agreement in the form of Exhibit XXXX. The Escrow Amounts shall not include accrued interest. At ------- --------- the Closing, Escrow Agent shall deliver the Escrow Amount to Seller in accordance with the terms of the Escrow Agreement. In the event of termination of this Agreement for any reason other than as set forth in the next sentence, the Escrow Amount, together with any and all interest accrued thereon, shall be returned to Buyer. In the event of termination of this Agreement by Seller as the result of a failure of a condition set forth in Section 14.1(d) and Seller is not in breach of its obligations and representations hereunder, Seller shall be entitled to the amount of Two Million Dollars ($2,000,000)(the "Liquidated Damages Amount"). The Liquidated Damages Amount shall be paid in part with the Escrow Amount, and the remainder shall be paid within thirty days (30) of the termination of this Agreement by Seller as set forth in this paragraph. The parties agree that the Liquidated Damages Amount constitutes a reasonable sum to compensate Seller for any losses incurred in such event, considering all of the circumstances existing on the date of this Agreement, including the relationship of the sum to the range of harm to Seller that could be reasonably anticipated and the anticipation that proof of actual damages would be costly or inconvenient. In placing their initials at the place provided below, Buyer and Seller each specifically confirms the accuracy of the statements made above and the fact that each was represented by counsel who explained the consequences of this liquidated damages provision at the time this Agreement was made. SELLER INITIAL HERE [INITIALS] -------------------- BUYER INITIAL HERE [INITIALS] ---------------------- 2.3 Method of Payment of Purchase Price. Subject to adjustment in ----------------------------------- accordance with Section 2.3(d), the Purchase Price shall be paid as follows: 2.3(a) Escrow Amount. Escrow Agent shall deliver the Escrow Amount to ------------- Seller in accordance with the terms of the Escrow Agreement. 2.3(b) Closing. In addition to the Escrow Amount to be delivered to ------- Seller by the Escrow Agent pursuant to Subsection 2.3(a) hereof, Buyer shall deliver to Seller one or more certified or cashier's checks or wire transfer payable as directed by Seller in the aggregate amount of Fourteen Million Two Hundred Fifty Thousand Dollars ($14,250,000). 2.3(c) Balance of Purchase Price. In addition to the amounts set forth ------------------------- in 2.3(a) and (b), Buyer shall pay to Seller an aggregate of Five Million Dollars ($5,000,000) 5 (the "Additional Amount") plus interest of 6% per annum from the Closing Date, commencing as of the first anniversary of the Closing Date, as follows: First Anniversary $1,000,000 plus accrued interest Second Anniversary $2,000,000 plus accrued interest Third Anniversary $2,000,000 plus accrued interest Buyer shall deliver to Seller a promissory note in the form attached hereto as Exhibit C providing for the payment of the Additional Amount, plus interest of - --------- 6% per annum. Buyer shall use its best efforts to obtain the consent of its primary lender to grant Seller a subordinated security interest in the Assets to secure payment of the Promissory Note, such security interest to be subordinate only to Buyer's primary lender. 2.4 Like-Kind Exchange. Seller contemplates that it may wish to engage in a ------------------ like-kind exchange under Section 1031 of the Internal Revenue Code with respect to some or all of the Assets (the "Exchange"). In the event Seller elects to participate in an Exchange, it shall notify Buyer not less than sixty (60) days prior to the Closing Date of that portion of the Assets which it desires to be part of an Exchange. Buyer agrees that so long as Buyer is not adversely affected, Buyer will cooperate with Seller at Seller's sole cost and expense, to enable Seller to facilitate the Exchange. Towards that end, Buyer shall deliver the Purchase Price in such manner as Seller shall direct. Buyer makes no representation, warranty or undertaking that any of the Assets qualifies for tax-free treatment under Section 1031 of the Code. Seller acknowledges that, notwithstanding Buyer's cooperation in the Exchange, Seller shall not be relieved of any of its obligations hereunder. 3. NO ASSUMPTION OF LIABILITIES. The leases described in Section 1.1(c), the orders and agreements described in Section 1.1(d), and the contracts, agreements, arrangements, commitments and understandings described in Schedule 1.1(e) (other than those marked with an --------------- asterisk) are herein referred to as the "Assumed Obligations" and are the only agreements, contracts, obligations or commitments of Seller, whether known or unknown, contingent or otherwise that are to be assumed by Buyer as of the Closing Date. Except for the Assumed Obligations, Seller shall be solely responsible, and there shall be no assumption of liability by Buyer, for any agreement, contract, obligation or commitment of Seller, whether known or unknown, contingent or otherwise, relating to either the Stations or any of the affairs of Seller including, but not limited to, any agreement, executed or executory, relating to the exchange of time on the Stations for goods, wares services, promotions, merchandising or anything other than cash. With respect to the Assumed Obligations, it is specifically understood that Buyer shall assume only those obligations of Seller thereunder accruing on or after the Closing Date. Buyer shall not be obligated to perform any contract, agreement, obligation or commitment of Seller, whether known or 6 unknown, contingent or otherwise, not specifically assigned to and assumed by Buyer hereunder. 4. SELLER'S REPRESENTATIONS AND WARRANTIES. As used in this Section 4, references to Seller's knowledge shall mean Seller's knowledge after Seller has exercised due diligence in making inquiries of its personnel. Seller represents and warrants that the following statements as to Seller and the Assets and the Stations are correct as of the date hereof and will be correct at the Closing Date and, with respect to the Real Property, will be correct as of the Real Property Transfer Date. 4.1 Licenses, Authorization and Compliance Therewith. Seller owns and/or ------------------------------------------------ has all franchises, licenses, permits, consents, approvals or authorizations of any public or governmental agency materially necessary to the conduct by Seller of its business as now conducted, including, but not limited to, the Licenses described in Schedule 1.1(a) hereto, without any material conflict with the --------------- rights of others, all of which are in full force and effect, except as set forth in Schedule 1.1(a), and subject to no lien, charge, encumbrance, or limitation. ---------------- Without material exception, to Seller's knowledge, Seller is in material compliance with all of its material obligations with respect thereto; and no event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any of the foregoing or would materially adversely affect the rights of Seller thereunder. Except as may be provided in Schedule 1.1(a), Seller has no knowledge of ---------------- any applications or any material complaints or proceedings pending or to the best of Seller's knowledge threatened as of the date hereof before the FCC directly relating to the business or operation of the Stations other than proceedings which generally affect the broadcast industry. Further, on the Closing Date, except as set forth on Schedule 1.1(a), the Stations will, unless otherwise provided, be on the air operating at full licensed power (consistent with the Stations' usual and customary engineering practices and the FCC's Rules and Regulations, the Communications Act of 1934, as amended (the "Act,") and regulations promulgated thereunder, under their present licenses, not under any Special Temporary Authority, as defined by the FCC. All FCC requirements for such authority will have been met, and there will be no material uncorrected FCC violations. If notice of any such violation is received or if Seller hereinafter becomes aware of any such violation prior to Closing, Seller, at its own expense, shall eliminate and cause to be removed all such violations by the date of Closing. All returns, reports and statements required to be filed with the FCC or other governmental agency relating to the Stations have been or will be duly and timely filed, and all said reports, returns and statements are or will be complete and correct as filed. To Seller's best knowledge, the "Public Inspection File" of the Stations will be complete and in full compliance with Section 73.3526 of the FCC's Rules and Regulations on the Closing Date. 7 4.2 Assets/Real Property. --------------------- 4.2(a) Rights, etc. to Sell. Seller is the owner of and will at the -------------------- Closing Date have good title to the Assets, the Tower Leases and the Real Property, and will on the Closing Date and the Real Property Transfer Date have full legal right, power and authority to assign, transfer and sell the Assets, the Tower Leases and the Real Property to Buyer, free and clear of all claims, security interests, mortgages, pledges, liens and other encumbrances of every nature whatsoever, except as set forth on Schedule 4.2(a), and in the case of the Real Property for Permitted Exceptions, as defined in Section 7.3. No action is pending or, to the knowledge of Seller, threatened, which would contest the ownership of, or right to transfer, any of the Assets, the Tower Leases or the Real Property. The Assets and the Real Property will not at the Closing Date or the Real Property Transfer Date, respectively, be subject to any contract, sale or other agreement, except for the Tower Leases, or as disclosed in writing to and expressly assumed or taken subject to by Buyer hereunder, and the delivery of the Assets or the Real Property to Buyer pursuant to the provisions of this Agreement will transfer good and valid title thereto, free and clear of all claims, security interests, mortgages, pledges, liens and other encumbrances of every nature whatsoever except for Permitted Exceptions in the case of Real Property. 4.2(b) Condition of Tangible Personal Property. The equipment described --------------------------------------- in Schedule 1.1(b) hereto comprises all the equipment used or useful to operate --------------- the Stations as they are presently being operated and to the best of Seller's knowledge said equipment is in material compliance with the FCC's Rules and Regulations. From the date hereof until Closing, the Stations and equipment will be operated and maintained in accordance with good engineering practices and to the best of Sellers knowledge in compliance with all of the FCC's Rules and Regulations. Except as disclosed in Schedule 1.1(b), there are no material --------------- defects in any of the structures, improvements, electronic equipment or other tangible personal assets of the Stations, all of which are in operating condition. All of the Stations' buildings, structures, transmitters, towers, antennas, guy wires, ground systems, radials and other improvements are on property that will be included within the boundaries of the Real Property. 4.2(c) Real Property. With respect to the Real Property: ------------- (i) Seller is not a "foreign person" as that term is used in Internal Revenue Code Section 1445 ("IRC (S)1445"), and Seller agrees to furnish to Purchaser, at or prior to Closing, an Affidavit of Non-Foreign Status or any other documentation required under IRC (S)1445 to evidence that Seller is not a "foreign person"; (ii) Except for the Tower Leases, there are no leases, rental agreements or other agreements relating to the Real Property which are to remain in 8 effect after Buyer takes title to the Real Property, and Seller will make no agreement relating to the Real Property with any person other than Buyer; (iii) Seller has not received any notice with respect to the Real Property of any threatened rezoning, annexation or modification to general plan proceeding which proceeding is still pending. 4.3 Contracts, Leases, Agreements, Etc. To the best of Seller's knowledge, ----------------------------------- each of the contracts, agreements, easements, licenses and leases (collectively, "Assumed Contracts") and the Tower Leases described in Sections 1.1(c), 1.1(d)-1, 1.1(d)-2, 1.1(e) and 1.2(b) hereto is valid, binding and enforceable in accordance with its terms and Seller is not in any material respect in default thereunder. Except for Assumed Contracts and Tower Leases marked with an asterisk on Schedules 1.1 (c), 1.1(d)-1, 1.1 (d)-2, 1.1(e) and 1.2(b) (the ----------------- -------- --------- ------ "Contract Schedules"), no consents are required to assign to Buyer Seller's interest in any of the Assumed Contracts or the Tower Leases. Except as set forth on Schedule 4.3, the Assumed Contracts and the Tower Leases may be assumed ------------ by Buyer without any material adverse change, and are now, and on the Closing Date will be, in full force and effect. 4.4 Employees and Agreements Relating to Employment. ----------------------------------------------- 4.4(a) Attached hereto as Schedule 4.4(a) is a listing of: (1) the --------------- names of all persons currently on the payroll of the Stations, together with the amount paid or payable to each such person for their services; (2) any bonus or other material compensation arrangements and personnel benefits or policies in effect, if any, for each employee; and (3) a complete copy of each such written plan, benefit, and policy. 4.4(b) Except as set forth on Schedule 4.4(b) Seller has made no --------------- representation to any of the Stations' employees concerning their employment, if any, by Buyer after the Closing Date. Any decision by Buyer to employ any of the employees of the Stations in the operation of the Stations on or after 12:01 a.m. on the Closing Date, other than those set forth on Schedule 4.4(b), shall --------------- be made in its sole discretion. 4.4(c) No labor union is currently certified, or otherwise recognized, as the collective bargaining representative for any of the Stations' employees. Seller has no actual knowledge of any labor strike, or other employee or labor controversy or dispute pending which would affect the operation of the Stations. 4.4(d) Seller is not, and on the Closing Date will not be, except as disclosed on Schedule 4.4(d), a party to: (a) any labor contract, (b) any --------------- vacation pay, severance pay or other benefit arrangement (including ERISA or similar plans) with its employees, or (c) any employment contract or agreement which is not terminable upon termination notice of thirty (30) days. 9 4.5 Litigation. Except as set forth on Schedule 4.5. there are no actions, ---------- ------------- judgments, suits, proceedings, investigations or inquiries pending or, to the knowledge of Seller, threatened against or affecting Seller which would materially affect the transactions contemplated by this Agreement or questioning the validity of any action taken or to be taken in connection with the implementation of the provisions of this Agreement, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, agency, court or instrumentality, domestic or foreign. Seller does not know or have reasonable grounds to know of any factors or circumstances which might be the basis of any action, suit or proceeding; and, to the best of Seller's knowledge, except as disclosed in Schedule 4.5, Seller has complied ------------ with all applicable statutes and regulations of all governmental authorities and agencies having jurisdiction over Seller. 4.6 Compliance with Law. -------------------- 4.6(a) Generally. Seller has complied and is in compliance in all --------- material respects with all laws, rules, regulations, and orders of any governmental entity applicable to Seller and the Assets, including, without limitation, the Act and rules and regulations thereunder ("Applicable Laws"). Seller has not been charged with and to the best of Seller's knowledge is not under investigation for any violation of Applicable Laws, nor, to the knowledge of Seller, is there any basis for any such charge or investigation. 4.6(b) Real Estate Matters. All of the Real Property and all ------------------- structures, transmitters, towers, equipment and improvements located thereon conform in all material respects with all applicable laws and regulations, including, without limitation, environmental, building and zoning laws and regulations, and no notice or actual knowledge of any violation of zoning, building or other laws, statutes and ordinances and regulations relating to such real property has been received or is known and there is no proposed, pending or threatened condemnation proceeding of similar action affecting any such Real Property. 4.6(c) Hazardous Materials. Except as set forth on Schedule 4.6(c), to ------------------- the best of Seller's knowledge, no hazardous or toxic materials (as hereinafter defined) exist in any structure located on, or exist on or under the surface of the Real Property. For purposes of this Agreement, "hazardous or toxic material" shall mean waste, substances, materials, smoke, gas, pollutants, contaminants, asbestos or asbestos related products, PCB's, petroleum, crude oil (or any fraction or distillate thereof) or particulate matter designated as hazardous, toxic or dangerous, or requiring special handling, treatment or storage whether or not designated hazardous, toxic or dangerous under any environmental laws. For purposes of this Agreement, the term "environmental laws" shall be interpreted to mean the Comprehensive Environmental Response Compensation and Liability Act, any successor to such law, and/or any other applicable federal, state, or local environmental, health or safety law, rule or regulation concerning the treating, producing, handling, storing, releasing, spilling, leaking, 10 pumping, pouring, emitting, or dumping of any waste, substance, materials, smoke, gas or particulate matter or imposing liability or standards in connection therewith. 4.7 Existence and Powers: No Conflict. Seller is a limited partnership and --------------------------------- its general partner is a corporation, each duly formed, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania, and each has the power and authority to own or lease its properties and to carry on business as now being conducted, and has all requisite power and authority to enter into, deliver and perform this Agreement. The execution, delivery, and performance of this Agreement by Seller have been duly and validly authorized by the Board of Directors of Seller's general partner and no other action is required. Neither the execution and delivery of this Agreement by Seller, nor the compliance by Seller with the respective terms thereof: (i) will, to the best of Seller's knowledge, breach any Applicable Laws; (ii) will conflict with or result in a breach of or constitute a default (or an event which, with notice or lapse of time, or both, would become a default) under any of the terms, conditions or provisions of any judgment, order, arbitration, injunction, decree or ruling of any court or governmental authority to which Seller or any of the Assets is subject or of Seller's Certificate of Formation, Agreement of Limited Partnership (as the same may have been amended) or any agreement, commitment, arrangement, lease, insurance policy, or other instrument to which Seller is a party or by which it is bound; (iii) will result in the creation of any lien, equitable lien, tax lien, mortgage, charge, security interest or other encumbrance upon any of the Assets; (iv) will give to any other person any interests or rights, including rights of termination or cancellation, in or with respect to any of the priorities, assets, agreements, contracts or business of Seller; (v) will result in the loss or adverse modifications of the Licenses or any other license, franchise, permit or other governmental authorization granted to or held by Seller; or (vi) require the consent of any person except as disclosed in this Agreement. 4.8 Operation of Stations. --------------------- 4.8(a) The Stations have been, and shall continue to be, operated (1) in material compliance with their Licenses and Applicable Laws, and (2) in a manner which will not to the knowledge of Seller based on applicable testing expose human beings to any level of non-ionizing radiation higher than the levels recommended for human exposure in FCC Report & Order ET Docket 93-62, released August 1, 1996. 4.8(b) Seller shall give prompt written notice to Buyer if (i) the transmission of the regular broadcast programming of either of the Stations in the normal and usual manner is interrupted or discontinued for a period in excess of eight (8) hours other than as a result of weekly routine maintenance or public utility company activity; or (ii) either of the Stations is operated at less than ninety (90%) of its licensed operating power, in either event for a period in excess of (A) twenty-four (24) consecutive hours or (B) an aggregate of seventy-two (72) hours in any thirty (30) day period; or (iii) either of the Stations operate at reduced power for ten (10) days, thereby requiring written notification to the 11 FCC pursuant to Section 73.1560(d) of the FCC Rules; or (iv) the programming format of either of the Stations is materially changed. 4.9 Insurance. The insurance policies owned by Seller or of which Seller is --------- a named beneficiary, set forth on Schedule 4.9 attached hereto, are now and on ------------ the Closing Date will be fully in effect in accordance with their terms, with no default in the payment of premiums on any such policy and no ground for cancellation or avoidance of any thereof or for reduction of the coverage provided hereby. 4.10 Absence of Insolvency. No insolvency proceedings of any character, --------------------- including, without limitation, bankruptcy, receivership, reorganization, composition or arrangement with creditors, voluntary or involuntary, affecting the Seller or any of its respective assets or properties, are pending or, to the knowledge of Seller, threatened, and Seller has made no assignment for the benefit or creditors, nor taken any action with a view to, or which would constitute the basis for, the institution of any such insolvency proceedings. 4.11 Intangibles. Seller owns and has the exclusive right to use all the ----------- Intangibles presently used in conjunction with the operation of the Stations, together with any goodwill associated therewith. To the best of Seller's knowledge, the Intangibles are subject to no pending or threatened challenge and none of the lntangibles is being infringed by the activities or operations of any third person and none is subject to any outstanding order, judgment, decree, stipulation or agreement restricting the use thereof. 4.12 Financial Statements. Seller has heretofore furnished Purchaser with -------------------- copies of the following financial statements of Seller: (i) unaudited statements of operating cash flows for the Stations for the three-month period ended March 31, 1996, and years ended December 31, 1995 and 1994 (the "Operating Statements"). Except as noted therein or on Schedule 4.12, the Operating ------------- Statements are complete and correct in all material respects, were prepared in accordance with the accounting methods consistently applied by Sellers and present fairly the results of operating cash flows for said periods. 4.13 Taxes. As of the Closing Date, Seller shall have timely and duly filed ----- with the appropriate governmental agencies all tax returns, declarations of estimated tax, and tax reports required to be filed by it, and all taxes and other assessments which Seller is required to pay, withhold or collect have been timely and duly paid, withheld and collected. There are no present disputes as to taxes of any nature payable by Seller with respect to the Stations and it has not filed an IRS Form 872 ("Consent Fixing Period of Limitations Upon Assessment of Income Tax") or otherwise agreed to extend the time for assessment of any taxes against it for any year. Any additional taxes, interest, penalties, assessments and deficiencies that shall become due and payable with respect to any tax return or tax obligation of Seller shall be the sole responsibility of Seller. 12 4.14. Net Operating Profit. The Stations' 1995 broadcast cash flow, with -------------------- certain adjustments, for the twelve months ending December 31, 1995 and on a trailing basis for the most immediate twelve (12) month period preceding Closing, will not be less than Five Hundred Thirty-Eight Thousand Dollars ($538,000). 4.15. Absence of Certain Changes. Since December 31, 1995, there has not -------------------------- been (i) any material adverse change in the property of Seller or any material labor dispute, grievance or organizational effort affecting the Assets, taken as a whole; (ii) any physical damage, destruction or loss (not covered by insurance) materially and adversely affecting the Assets or business of Seller, taken as a whole; (iii) any sale, assignment, lease or other transfer or disposition of any of the assets or properties of Seller except in the ordinary course of business and with adequate replacement property being acquired as necessary; or (iv) any waiver of any right resulting in a materially adverse affect on the Assets. 4.16. Accounts Receivable. Prior to and after the Closing Date, Seller ------------------- shall make no effort to accelerate the collection of Accounts Receivable. 5. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and warrants that the following statements as to Buyer are correct as of the date hereof and will be correct at the Closing Date: 5.1 FCC Qualifications. Buyer knows of no reason it will not be found ------------------ qualified under the Act, and the rules, regulations and policies promulgated thereunder, to obtain FCC approval of the Application referred to in Section 8 and serve as the licensee of the Stations. Buyer has no knowledge of any material reason, fact, allegation or claim not stated herein which may impair Buyer's qualifications and knows of no reason why the FCC would not approve said Application. Between the date hereof and the Closing, Buyer will take no action knowingly that would substantially delay FCC approval or render Buyer not qualified. 5.2 Existence and Powers; No Conflict. Buyer is a limited partnership duly --------------------------------- formed, validly existing and in good standing under the laws of the State of Delaware and has the power and authority to own or lease its properties and to carry on business as now being conducted, and has all requisite power and authority to enter into, deliver and perform this Agreement. The execution, delivery, and performance of this Agreement by Buyer have been duly and validly authorized by Buyer's general partner, and no other action is required. Neither execution and delivery of this Agreement by Buyer, nor the compliance by Buyer with the respective terms hereof: (i) will, to Buyer's best knowledge, breach any Applicable Laws; (ii) will conflict with or result in a breach of or constitute a default (or an event which, with notice or lapse of time, or both, would become a default) under any of the terms, conditions or provisions of, any judgment, order, arbitration award, injunction, decree or ruling of any court or governmental authority to which Buyer is subject, or of Buyer's partnership agreement(s), or any 13 contract commitment arrangement or agreement to which Buyer is party or by which it may be bound; or (iii) require the consent of any person except as disclosed in this Agreement. 5.3 Disclosure. No covenant, representation or warranty made by Buyer in ---------- this Agreement and no statement made in any certificate or document furnished or to be furnished by Buyer in connection with the transactions contemplated by this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary to make such representation, warranty or statement not misleading to Seller. 5.4 No Litigation. There is no litigation, judgment or decree outstanding ------------- or other judicial or administrative proceeding pending or, to the best of Buyer's knowledge, threatened which might adversely affect Buyer's power, authority or ability to enter into this Agreement and to carry out the transactions contemplated herein. Buyer does not know or have reasonable grounds to know of any factors or circumstances which might be the basis for such litigation, proceeding or investigation. 5.5 Financial Ability of Buyer. Buyer has a commitment of funds to -------------------------- undertake its obligations pursuant to this Agreement, and Buyer has no knowledge of any approval or consent of a financial institution or investor needed to undertake such obligations. 5.6 Accounts Receivable. Prior to and within 30 days after the Closing ------------------- Date, Buyer shall make no effort to delay payment of the Accounts Receivable and shall pursue collection of Accounts Receivables in a manner consistent with Seller's current collection practices. 6. AGREEMENT NOT TO COMPETE. 6.1 Agreement Not To Compete. On or before the Closing Date, Seller, Faye ------------------------ Scott and Mitchell Scott shall each execute individually an Agreement Not to Compete in the form annexed hereto as Exhibit D pursuant to which each shall --------- agree not to participate in the ownership, management, operational control of, and not be connected with or have any interest in, any radio station licensed to any community within the counties of Mercer, Somerset, Middlesex, Burlington and Monmouth in the State of New Jersey and Bucks in the Commonwealth of Pennsylvania for a period of three (3) years immediately following the Closing. The parties hereto agree that the duration and area of the Agreement Not to Compete are reasonable. In the event that any Court determines that the duration or area, or both of them, are unreasonable, and the Agreement Not to Complete is to that extent unenforceable, the parties hereto agree that the Agreement Not to Compete shall remain in full force and effect for the greatest period of time and in the greatest area that would render it enforceable. Seller agrees that damages are an inadequate remedy for 14 any breach of this covenant and that Buyer shall, whether or not it is pursuing any potential remedies at law, be entitled to equitable relief, in the form of temporary, preliminary and permanent injunctions, without bond or security, without any actual or threatened breach of this Agreement Not to Compete. By executing this Agreement in the space provided below, Seller, Faye Scott and Mitchell Scott, each agree to execute such Agreement Not to Compete and deliver such Agreement to Buyer at Closing. /s/ Faye Scott /s/ Mitchell Scott - -------------------------- -------------------------------- Faye Scott Mitchell Scott /s/ Faye Scott -------------------------------- Faye Scott, President Seller Great Scott Communications, Inc. General Partner 7. CONDUCT PRIOR TO CLOSING. 7.1 Access and Information. Seller shall give Buyer and its representatives ---------------------- reasonable access throughout the period prior to Closing to the operations, properties, books, contracts, agreements, leases, commitments and records of the Stations at reasonable times, provided that the normal operations of Seller's business shall not be disrupted. 7.2 Conduct of Station Business. Between the date hereof and Closing: --------------------------- 7.2(a) Seller shall use its reasonable best efforts to produce the consent of any third parties necessary for the assignment to Buyer of any contract, lease or agreement marked with an asterisk and listed on the Contract -------- Schedules; - --------- 7.2(b) Seller shall (i) conduct the business of the Stations in a prudent and responsible manner in good faith and operate and maintain the Stations and the Assets in accordance with good engineering and Seller's past practices and in compliance with the terms of the Licenses and Applicable Laws; and (ii) keep all of the Assets to be transferred hereunder in substantially the same operating condition and repair as of the date hereof, reasonable wear and tear excepted; 7.2(c) Except as set forth in Schedule 7.2(c). Seller shall not (i) --------------- hire additional personnel (other than temporary employees hired in the ordinary course of business) or unreasonably increase the compensation or bonuses payable or to become payable to any of the Stations' employees; (ii) enter into an agreement to sell, assign, lease, exchange or otherwise transfer or dispose of any of the Assets; (iii) enter into any 15 new contract or renegotiate, modify, amend, renew, or terminate any existing contract, except that Seller may, in the ordinary and usual course of business, enter into: (1) agreements for the sale of time on the Stations for such rates and on such terms as are consistent with Seller's normal and usual practices; (2) any contract(s) terminable on thirty (30) days notice or less without premium or penalty; and (3) any contract(s) consented to by Buyer in writing; (iv) change the Stations' call letters, or change the Stations' facilities, or apply for any construction permit(s) with the FCC, without Buyer's consent, which will not be unreasonably withheld or delayed, or make any material adverse changes in the Stations' leasehold improvements and other improvements and fixtures; or (v) except as required by law or any governmental agency, disclose any information relating to the Stations to any third party, other than to Seller's authorized employees, agents and professional advisors in the ordinary course of business and other than to Buyer and Buyer's authorized representatives as provided for herein; 7.2(d) Seller shall maintain in full force and effect the insurance described in Schedule 4.9; and ------------ 7.2(e) Seller shall give Buyer notice of any unusual operating problems or developments affecting Seller between the date hereof and the Closing Date, including, but not limited to, any problem or development which would materially adversely affect the Assets, and keep Buyer fully apprised of all matters having material financial impact on Seller. 7.3 Buyer's Inspections and Approvals. --------------------------------- 7.3(a) Seller agrees to convey and Buyer agrees to accept such title to the Real Property as the title company shall be willing to insure on its standard form and at standard rates, such title to be subject to: (i) all standard exclusions and printed exceptions in the standard form of owner's policy of title insurance; (ii) encroachments and all other matters that would be disclosed by a current and accurate survey of the Real Property; (iii) liens for taxes and assessments not yet due and payable; (iv) easements for public utilities affecting the Real Property; (v) all easements, covenants, restrictions and rights-of-way affecting the Real Property; (vi) the exceptions listed on Schedule 7.3; and (vii) both (a) any applicable zoning ordinances, ------------ other land use laws and regulations, and (b) those matters, if any, which are waived by Buyer pursuant to this Section (the foregoing title matters are hereinafter referred to as the "Permitted Title Exceptions"). Within thirty (30) days of the execution of this Agreement, Buyer shall order, at Buyer's sole cost and expense, a title commitment from a title insurance company authorized to do business in the State of New Jersey (the "Commitment"). If the Commitment reveals a defect in title which is not one of the Permitted Title Exceptions, Buyer may either waive such defect or give prompt (within ten (10) days of receipt of such commitment or endorsement, time being of the essence) written notice to Seller of such defect in title, whereupon Seller may, at its option, attempt to cure such defect prior to the Closing or decline to cure such defect. Nothing contained herein shall be deemed or construed to require Seller to incur any costs and expenses, 16 or to bring any action or proceeding, to remove any defect in title. Notwithstanding the foregoing, Seller shall have the right, at its sole option, to extend the Closing Date by not more than sixty (60) days to attempt to cure any defect in title objected to by Buyer in accordance with this Section 7. Seller shall give Buyer no less than five (5) business days notice of the new closing date. 7.3(b) On the Closing Date, Seller shall transfer the Real Property to Eizen Feinberg & McCartney, P.C., as Trustee, to be held in trust until the Real Property Closing Date, in accordance with the form of trust agreement attached hereto as Exhibit D (the "Trust Agreement"). --------- 7.3(c) Environmental Audit. Buyer shall promptly, at its expense, ------------------- arrange for such environmental investigations and audits (an "Audit") of the Real Property as it deems appropriate, including, without limitation (i) conditions with respect to or contamination or pollution of surface or ground waters, soil and air, (ii) the disposal, presence, release or threat of release of hazardous or toxic material thereon, and (iii) compliance with environmental laws or other Applicable Laws. Buyer shall furnish Seller with a copy of the report of any Audit within five (5) days after Buyer's receipt thereof. If the Audit discloses a condition which materially contradicts the representations in Section 5.6(c), Buyer may either: (1) Elect to consummate the purchase of all the Assets in which case Seller shall bear the cost of remediating such condition in an amount not to exceed $200,000 and such amount shall be deducted from the Purchase Price; or (2) Elect to consummate the purchase of the Assets exclusive of that portion of the Real Property on which the condition exists (and exclusive of the lease in the event such Real Property is leased by Seller), in which case the Purchase Price shall be reduced by the fair market value of such Real Property without reference to such condition. 7.3(d) Engineering Inspection. It is agreed that, not less than ten ---------------------- (10) days prior to the Closing Date, Buyer's engineer may inspect the Assets to insure that its equipment complies with all warranties and conditions set forth herein. Seller agrees to extend full cooperation to said engineer, including such access to the equipment and to logs pertaining thereto at such time or times as said engineer shall reasonably request. Buyer shall furnish Seller with a copy of the report of any inspection prior to the Closing Date. If Buyer's engineer reports that the equipment fails to materially comply with said warranties, Buyer may either: (1) Elect to consummate the purchase of the Assets in which case Seller shall bear the cost of equipment repair in excess of 17 $10,000 in an amount not to exceed $50,000 and such amount shall be deducted from the Purchase Price; or (2) Elect to consummate the purchase of the Assets exclusive of the equipment which fails to materially comply with warranties, in which case the Purchase Price shall be reduced by the fair market value of such equipment. 7.4 Risk of Loss. The risk of any loss, damage or destruction to any of the ------------ Assets from fire or other casualty or cause shall be borne by the Seller at all times prior to 12:01 a.m. on the Closing Date. Upon the occurrence of any loss or damage to any material portion of the Assets as a result of fire, casualty or other cause prior to Closing, Seller shall notify Buyer of same in writing immediately, stating with particularity the extent of such loss or damage incurred, the cause thereof if known, and the extent to which restoration, replacement and repair of the Assets lost or destroyed will be reimbursed under any insurance policy with respect thereto. Subject to the provisions hereof, Buyer shall have the option (but not the obligation), in the event the loss or damage exceeds One Hundred Thousand Dollars ($100,000.00) and the property cannot be substantially repaired or restored within sixty (60) days, exercisable within ten (10) days after receipt of such notice from Seller to: (i) postpone the Closing until such time as the property has been completely repaired, replaced or restored, unless the same cannot be reasonably effected within two (2) months of notification; (ii) elect to consummate the Closing and accept the property in its "then" condition, in which event Seller shall at the Closing assign to Buyer all rights under any insurance claim covering the loss and pay over any proceeds under any such insurance policy theretofore received by Seller with respect thereto; or (iii) rescind this Agreement at no cost or expense to Buyer and declare the Agreement of no further binding force and effect, if such repairs, replacements or restorations are not completed within ninety (90) days after the date specified herein as the Closing Date, provided that such repairs, replacements or restorations are necessary to the normal operation of the Stations. In the event Buyer elects to postpone the Closing Date as provided in clause (i) of this Subsection, the parties hereto will cooperate to extend the time during which this Agreement must be closed as specified in the consent of the FCC referred to herein. 7.5 Confidentiality. Between the date of this Agreement and the Closing --------------- Date, Buyer will maintain strict confidentiality with respect to all documents and information furnished by or on behalf of Seller (except for documents of information required to be disclosed by law), and, if this Agreement is terminated, Buyer shall return to Seller all such documents and information. Notwithstanding the foregoing, Buyer may make disclosure that may be required: (i) by its lenders; (ii) in the preparation of federal, state and local tax returns; (iii) pursuant to any federal or state securities laws; or (iv) as may be necessary to advise any of Buyer's investors or advisors; provided, that, in such case, Buyer shall advise the investors of the confidentiality of the information. 18 7.6 Prohibited Action. Between the date of this Agreement and the Closing ----------------- Date, neither Buyer nor Seller will commit any act or omission that would: (i) disqualify them as parties to an assignment of the Licenses or, as to Buyer, as owner or operator of the Stations and the Assets; (ii) jeopardize the validity of the Licenses or (iii) interfere with the existing relationships between the Stations and their advertisers, suppliers and others. 8. APPLICATION FOR FCC APPROVAL. 8.1 Filing and Prosecution of Application. As promptly as practicable after ------------------------------------- the execution of this Agreement, and in no event later than ten (10) business days thereafter, Buyer and Seller shall join in an application to the FCC requesting the FCC's written consent to the assignment of the Licenses of the Stations to Buyer and to the consummation of the transactions contemplated by this Agreement (the "Application"). Both parties shall promptly respond to any requests for the submission of additional information and shall vigorously oppose any protest, petition to deny, petition for reconsideration or appeal of the FCC's consent and approval that may be filed. Buyer and Seller shall proceed with due diligence and promptly take all steps necessary to the expeditious prosecution of such application to a favorable conclusion, using their best efforts throughout. 8.2 Expenses. Each party shall bear its own expenses in connection with the -------- preparation of the applicable sections of the Application and in connection with the prosecution of such application. Seller and Buyer will divide and pay equally the filing and grant fees, if any, charged by the FCC. 8.3 Designation for Hearing. If, for any reason, the Application is ----------------------- designated for hearing by the FCC or if the parties are notified by the FCC in writing of its intention to designate the Application, either party, if not then in default, shall have the right by written notice within fifteen (15) days of such designation for hearing, to terminate this Agreement. 8.4 Control of Stations. This Agreement shall not be consummated until the ------------------- FCC has given its written consent to the assignment of the Licenses of the Stations. 8.5 Best Efforts. Each party hereto agrees to use its best efforts in the ------------ performance and fulfillment of all terms and conditions of this transaction applicable to such party and in filing an application for the FCC's consent, and agrees to execute such other and further documents as may be reasonably required to carry out the intent of this Agreement. 19 9. BULK SALES LAW. Buyer hereby waives compliance by Seller with the provisions of all Bulk Sales Laws, or other similar provisions, provided, however that Seller agrees to indemnify and hold Buyer harmless for any claims arising thereunder. 10. CLOSING. Subject to the terms and conditions herein stated, the parties agree as follows: 10.1 Closing Date and Real Property Transfer Date. The Closing -------------------------------------------- of the transactions contemplated herein, other than for the transfer of the Real Property, shall be held on a date and time as specified by Buyer in writing to Seller that is no less than five (5) and no more than fifteen calendar (15) days after the date upon which the approval of the FCC required for the consummation of the transactions contemplated herein shall become a "Final Order," or on such date upon which the parties mutually agree in writing; provided, however, that "Final Order" means the date on which the consent of the FCC is no longer subject to administrative or judicial reconsideration, review, appeal or stay; provided further, that in the event the date of the Final Order is on or after December 1, 1996, the Closing will take place no earlier than January 1, 1997 on a date specified by Buyer. The parties hereby agree and stipulate that, absent the pendency of any petition, application or motion seeking reconsideration, review, appeal or stay of the Consent, and absent any FCC action reconsidering, reviewing, staying or modifying the Consent, such Consent shall be treated as final as of 12:01 A.M. on the forty-first day after the date of public notice issued by the FCC approving the assignment of the Licenses to Buyer. The Closing shall take place at the Trenton offices of Sterns & Weinroth, A Professional Corporation, at 9:00 A.M. local time, or such other time or place as mutually agreed. Notwithstanding anything contained in this Section 10.1 to the contrary, if the Closing does not occur by April 1, 1997, then either Seller or Buyer shall have the right to terminate this Agreement subject to the terms and conditions of Section 14 hereof, and the Escrow Amount shall be refunded to Buyer. The Real Property Transfer Date shall be the third anniversary of the Closing Date. 10.2 Seller's Obligations at Closing. At the Closing, Seller shall execute ------------------------------- and deliver or cause to be delivered to Buyer the following, in a form and substance reasonably approved by counsel for Buyer: 10.2(a) A Bill of Sale for all tangible personal property to be transferred hereunder, pursuant to Section 1.1(b), containing a warranty of title and covenant against all liens, encumbrances and restrictions of any kind whatsoever. 10.2(b) One or more assignments, assigning to Buyer the Licenses and intangible property to be acquired by Buyer hereunder; 20 10.2(c) One or more assignments assigning to Buyer the Contracts to be assigned to Buyer hereunder together with all necessary consents thereto and the original copies of said Contracts; 10.2(d) A certificate from Seller stating that: (i) all representations and warranties of Seller as set forth in this Agreement or in any statement, certificate, schedule, exhibit or other document delivered pursuant to this Agreement by Seller are true and correct in all material respects, as of the Closing Date; and (ii) Seller has, in all material respects, performed and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by Seller at or prior to the Closing Date; 10.2(e) The Agreement Not to Compete executed by each of Seller, Faye Scott and Mitchell Scott in the form attached hereto as Exhibit E; --------- 10.2(f) An opinion of Eizen Fineberg & McCarthy, counsel for Seller, in the form attached hereto as Exhibit F; --------- 10.2(g) An opinion of Seller's FCC Counsel in the form attached hereto as Exhibit G; --------- 10.2(h) Copies of the files, records and logs referred to in Sections 1.1(i) and 1.1 (j) hereof and copies of all of the Licenses; 10.2(i) An affidavit that Seller is not a "foreign person" as required under Internal Revenue Code (S)1445; 10.2(j) A lease to Buyer for the Real Property for a term of three years substantially in the form attached hereto as Exhibit A: --------- 10.2(k) The Trust Agreement in the form attached hereto as Exhibit D; --------- and 10.2(1) Such other documents or instruments as counsel for Buyer may reasonably request and in a form reasonably acceptable to Buyer's counsel, which documents are necessary to carry into effect the provisions of this Agreement. 10.3 Seller's Obligations on the Real Property Transfer Date. On the Real ------------------------------------------------------- Property Transfer Date, Seller shall execute and deliver to Buyer a duly acknowledged bargain and sale deed with covenants against grantor's acts conveying the Real Property to Buyer and shall do any other act necessary to convey the Real Property to Buyer. 21 10.4 Buyer's Obligations at Closing. At the Closing, Buyer shall execute ------------------------------ and deliver or cause to be delivered to Seller the following in a form and substance reasonably acceptable to Seller's counsel: 10.4(a) The Purchase Price as set forth in Section 2.3 hereof consisting of: (i) Executed instructions to Escrow Agent, directing it to release to Seller the Escrow Amount in the amount of Seven Hundred Fifty Thousand Dollars ($750,000); (ii) Fourteen Million Two Hundred Fifty Thousand Dollars ($14,250,000) by bank cashier's check, certified check or wire transfer at Seller's election; and (iii) The Promissory Note for Five Million Dollars ($5,000,000) plus interest at six percent (6%) per annum; 10.4(b) One or more assumptions assuming the Contracts being assigned by Seller; 10.4(c) A certificate from Buyer stating that: (i) all and warranties of Buyer as set forth in this Agreement or any statement certificate, or other document delivered pursuant to this Agreement by Seller are true and correct in all material respects as of the Closing Date, and (ii) Buyer has, in all material respects, performed and complied with all covenants, complied with by Buyer at or prior to the Closing Date; and 10.4(d) Such other documents or instruments as counsel for Seller may reasonably request and in a form acceptable to Seller's counsel, which documents are necessary to carry into effect the provisions of this Agreement. 10.5 Condition to Obligations of Buyer. The obligation of Buyer to --------------------------------- consummate the purchase of the Assets ate the Closing shall be subject to the performance, in all material respects, on or prior to the Closing Date, of all of the covenants and agreements as set forth elsewhere in this agreement to be performed by Seller, and upon the following addional conditions: 10.5(a) The representations and warranties of Seller shall be true in all material respects as of the Closing Date; and 10.5(b) There shall not have occurred any material adverse change in the condition of the Assets, ordinary wear and tear excepted; and 22 10.5(c) The consents required from the FCC (including, without limitation, the Final Order of the FCC) to Buyers acquisition of the Assets, shall have been granted, without any condition materially adverse to Buyer, and such consents shall be valid and outstanding on the Closing Date; and 10.5(d) No action or proceeding shall be pending or threatened, challenging the validity of this Agreement or seeking to delay the consummation of any of the transactions for which this Agreement provides, which in the reasonable opinion of Buyer is material to the transactions contemplated by this Agreement; and 10.5(e) Seller shall have obtained and delivered to Buyer the written consents of all requisite parties to assign and transfer to Buyer those Contracts material to the operation of the Stations without conditions materially adverse to Buyer; and 10.5(f) Seller shall have in all material respects performed and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by it prior to and on the Closing Date; and 10.5(g) All of the requirements of Section 10.2 shall have been met; and 10.5(h) Seller shall have received a letter of non-applicability or negative declaration or remediation agreement or other documents permitting the transfer from the New Jersey Department of Environmental Protection pursuant to the Industrial Site Recovery Act, if applicable. Buyer shall have the right to waive any or all of the foregoing conditions of Closing at its sole option and risk. 10.6 Condition to Obligations of Seller. The obligation of Seller to ---------------------------------- consummate the purchase of the Assets at the Closing shall be subject to the performance, in all material respects, on or prior to the Closing Date, of all of the covenants and agreements as set forth elsewhere in this Agreement to be performed by Seller, and upon the following additional conditions: 10.6(a) The representations and warranties of Buyer shall be true in all material respects as of the Closing Date; and 10.6(b) The consents required from all governmental agencies (including, without limitation, the Final Order of the FCC) to Buyer's acquisition of the Assets shall have been granted, without any condition materially adverse to Seller, and such consents shall be valid and outstanding on the Closing Date; and 23 10.6(c) Buyer shall have in all material respects performed and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by it prior to and on the Closing Date; and 10.6(d) No action or proceeding shall be pending or threatened, challenging the validity of this Agreement or seeking to delay the consummation of any of the transactions for which this Agreement provides, which in the reasonable opinion of Seller is material to the transactions contemplated by this Agreement; and 10.6(e) All of the requirements of Section 10.4 shall have been met. Seller shall have the right to waive any or all of the foregoing conditions of Closing at its sole option and risk. 10.7 No Right of Reversion. Both Seller and Buyer agree that the Sellers --------------------- have retained no right of reversion of the Licenses, no right to assignment of the Licenses, and have not reserved the right to use the facilities of the Companies after the Closing Date for any reason whatsoever. 10.8 Further Assurance. From time to time, upon request and without further ----------------- consideration on or after the Closing Date, Seller and Buyer will execute and deliver such other instruments of conveyance and transfer and take such other action as may be reasonably required more effectively to convey, transfer to and vest in the Buyer, and to put the Buyer in possession and operating control of, any part of the Assets, and, in the case of contracts and rights, if any, which cannot be transferred effectively without the consent of third parties which is unobtainable, to use good faith efforts to secure to the Buyer the benefits thereof. 11. OTHER CLOSING OBLIGATIONS. 11.1 Prorations. Seller shall, pursuant to Section 1.1(k), be entitled to ---------- moneys collected within 30 days of the Closing Date based upon Seller's Accounts Receivable and shall be responsible for all liabilities and obligations incurred or payable in connection with the operation of the Stations through the close of business on the day preceding the Closing Date. Buyer shall be entitled to all income earned or accrued and shall be responsible for all liabilities and obligations incurred or payable in connection with the operation of the Stations after the close of business on the day preceding the Closing Date, and Buyer shall be entitled to moneys based upon Sellers Accounts Receivable collected more than 30 days after the Closing Date. All overlapping items of income or expense shall be apportioned between Seller and Buyer as of the close of business on the day preceding the Closing Date, in accordance with generally accepted accounting principles with the understanding that Buyer shall only have responsibility for the Assumed Obligations. Items to be apportioned include, but are not limited to, the following: 24 11.1(a) Prepaid expenses arising from payments made for goods or services prior to the Closing Date if all or part of the goods or services have not been received or used prior to the Closing Date (for example, rents paid in advance for a rental period extending beyond the Closing Date); 11.1(b) Liabilities, customarily accrued, arising from expenses incurred but unpaid as of the close of business on the day preceding the Closing Date (for example, frequency discounts; rent; and sales commissions); and 11.1(c) As to utility charges relating to the Stations, within thirty (30) days after the Closing, Buyer shall deliver to Seller a statement setting forth in reasonable detail the basis for prorations pursuant to this Section, and Buyer shall pay to Seller, or Seller shall pay to Buyer, as the case may be, any net amount due as the result of the proration statement (or, if there is a dispute, the undisputed amount thereof). If Seller disputes Buyer's determinations, or, if at any time after delivery of Buyer's statement of determinations any party determines that any item included in the proration is inaccurate or that an additional item should be included in the prorations, the parties shall confer with regard to the matter and an appropriate adjustment and payment shall be made as agreed upon by them or, if they are unable to resolve the matter, by a firm of independent certified public accountants mutually agreeable to the parties, whose decision on the matter shall be binding and whose fees and expenses shall be borne equally by them. 11.2 Fees: Sales and Transfer Taxes. All filing and recording fees in ------------------------------ connection with any instrument of conveyance or transfer delivered pursuant to this Agreement shall be paid by Buyer. All sales and other transfer taxes, if any, in respect of the Assets sold and transferred hereunder shall be paid by Buyer and Seller equally. Buyer shall pay the premium for a standard owner's policy of title on the Real Property; if Buyer desires an ALTA Policy, Buyer shall pay the additional premium therefor. 11.3 Other Taxes. Any and all sales taxes, unemployment insurance and ----------- social security taxes, and all other taxes due any state, federal or local government by Seller on or before the Closing Date shall be paid by Seller on, or prior to, such time. 11.4 Employees. On the Closing Date, Seller shall notify all persons --------- employed by Seller in connection with the business of the change of the ownership of the business and shall pay all wages and bonuses owing to such employees (and all vacation, severance pay and fringe benefits to which such employees are entitled) such that any employee of Seller whom Buyer may elect to retain in Buyer's employ shall have no claim against Buyer by reason of any prior employment in Seller's business during Seller's ownership thereof. 12. ALLOCATION OF PURCHASE PRICE. The purchase price shall be allocated among the Assets pursuant to the mutual agreement of the Buyer and Seller prior to the Closing Date. Each of the parties hereto 25 agrees to prepare and file its tax returns reflecting the allocations in a manner consistent with this Agreement. 13. INDEMNIFICATION. 13.1 Survival of Representations and Warranties. All covenants and ------------------------------------------ agreements pertaining to matters to be performed after Closing and all representations and warranties contained in this Agreement shall survive for a period not to exceed two (2) years after the Closing Date ("Survival Period") except that the representations and warranties (a) with respect to title or (b) which the party making the same knew or would have, through the exercise of reasonable diligence, known to be false shall continue for the longest period permitted under any applicable statute of limitations. No claim which is the subject of the Survival Period may be brought under this Agreement or with respect to the transactions described herein 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 Survival Period. In the event such notice is so given, the right to indemnification with respect thereto under this Section 13 shall survive the Survival Period until such claim is finally resolved and any obligations with respect thereto are fully satisfied. 13.2 Indemnity by Seller. Seller agrees to pay and discharge and to save ------------------- and protect Buyer and its officers, directors, shareholders and affiliates free and harmless from all obligations, claims and demands (including reasonable attorneys' fees incurred by Buyer with respect thereto) (collectively "Seller's Obligations") against, arising out of or in connection with (a) any lease, contract or other agreement of Seller not assumed by Buyer pursuant to this Agreement; (b) the ownership of the Stations or the Assets that shall arise or accrue prior to the Closing; and (c) any material breach or violation by Seller of any covenant, agreement or warranty herein contained, or the inaccuracy of any representation of Seller made in this Agreement. 13.3 Indemnity by Buyer. Buyer agrees to pay and discharge and to save and ------------------ protect Seller and its officers, directors, shareholders and affiliates free and harmless from all obligations, claims, and demands (including but not limited to attorney fees incurred by Seller with respect thereto) against, arising out of or in connection with (a) any lease, contract, or other agreement of Seller to be assumed by Buyer pursuant to this Agreement; (b) that shall arise or accrue against or in connection with the ownership or operation of the Stations and the Assets from and after the Closing; and (c) any material breach of violation by Buyer of any covenant, agreement or warranty herein contained or the inaccuracy of any representation of Buyer made in this Agreement. 13.4 Indemnification Procedure: Right of Offset. In the event that any ------------------------------------------ party hereto asserts a claim for indemnification hereunder, such party seeking indemnification shall give written notice to the indemnifying party specifying the nature and the amount, if known, of the claim asserted. The indemnifying party shall then have the right, using counsel reasonably satisfactory to the party seeking indemnification, to investigate, secure, contest or settle the claim alleged by such third party (hereinafter called a 26 "contest"), provided that the party seeking indemnification may participate voluntarily, at its own expense, in any such contest through representatives and counsel of its own choice, and, provided further, that any such action by the indemnifying party relating to the contest shall be without prejudice to the party seeking indemnification. 13.5 Certain Limitations. The following limitations to the indemnity shall ------------------- apply: 13.5(a) Either party's obligation to indemnify for and its liability in respect of Seller's Obligations or Buyer's Obligations, as the case may be, referred to in either Section 13.2 or 13.3 shall accrue only if the aggregate of all such obligations exceeds $175,000.00, and then, either party shall be liable to the for all such obligations in excess of such initial $175,000.00, subject to the limitations otherwise contained herein; 13.5(b) The amount of either the Seller's obligations or Buyer's obligations, as the case may be, shall be reduced by the amount of any tax benefit attributable to such party's losses as, when and only to the extent that such party actually realizes such tax benefit and the net amount such party recovers from any insurer or other party liable for such losses, and the responsible party shall use all reasonable efforts to effect such recovery. If a tax benefit attributable to any party's losses is subsequently disallowed in any tax audit or administrative or court proceeding, the affected party shall promptly make a payment to the other party equal to the amount by which the losses were reduced as a result of the subsequently disallowed tax benefit; and 13.5(c) If the amount of any limitation pursuant to this Section is determined after payment by the appropriate party of any amount otherwise required to be paid pursuant to this Section 13, said party shall repay to the other party promptly, after such determination, any amount that said party would not have had to pay pursuant to this Section 13 had such determination been made at the time of such payment. Except as provided otherwise in Section 13.4, the indemnifying party shall bear all costs of such contests and shall indemnify and hold the party seeking indemnification harmless against and from all costs, fees, and expenses of such contest. Unless and until the indemnifying party elects to prosecute the contest, the party seeking indemnification shall have the full right, at its option, to do so and to look to the indemnifying party under the provisions of this Agreement for the amount of the costs, if any, of prosecuting the contest. The failure of the indemnifying party to respond in writing to the aforesaid notice of the party seeking indemnification with respect to such contest within twenty (20) days after the receipt thereof shall be deemed an election not to prosecute the same. If the indemnifying party fails to prosecute the contest and the party seeking indemnification does not prosecute the contest or does so and the decision is rendered against it, the amount paid by the party seeking indemnification to the third party in settlement or satisfaction of the contest shall be deemed a valid claim hereunder. In the event that the contest involves any Seller's Obligations, Buyer shall have the right to offset the amount of the costs, if any, incurred by Buyer in prosecuting the contest 27 together with any sums owed in connection with the resolution or settlement thereof against amounts which may be owed by Buyer to Seller. The parties hereto shall make mutually available to each other all relevant information in their possession relating to any such contest and shall cooperate in the defense thereof. 14. TERMINATION BEFORE CLOSING; DEFAULT AND REMEDIES. 14.1 Termination before Closing. If Closing shall not have previously -------------------------- occurred, this Agreement may be terminated: 14.1(a) If the Closing has not occurred prior to the time provided for in Section 10.1 (except on account of a breach by Buyer or Seller as set forth in 14.1(c) or (d)); 14.1(b) Pursuant to Section 7.3 hereof; 14.1(c) By Buyer, upon the occurrence of a Seller's Event of Default (as defined in Section 14.2) or upon failure of a condition precedent to Buyer's obligation to close set forth in Section 10.5; 14.1(d) By Seller, upon the occurrence of a Buyer's Event of Default (as defined in Section 14.2) or upon failure of a condition precedent to Seller's obligation to close set forth in Section 10.6, other than the conditions set forth in Section 10.6(b); or 14.1(e) By Seller upon the failure of any of the conditions set forth in Section 10.6(b) hereof. In the event of termination pursuant to Section 14.1(d) above, Seller shall be entitled to the Liquidated Damages Amount pursuant to Section 2.2 hereof. In the event of termination of this Agreement for any other reason, Buyer shall be entitled to return of the Escrow Amount as provided in Section 2.2 hereof. 14.2 Default and Remedies. 14.2(a) The occurrence of any one or more of the following events shall constitute a material default of this Agreement by Buyer ("Buyer's Event of Default"): (i) The material breach of any representation or warranty by Buyer hereunder unless such breach is cured prior to the Closing Date; (ii) The failure by Buyer to consummate the transactions contemplated by this Agreement in violation of the provisions of this Agreement; 28 (iii) The failure by Buyer to perform any other of its obligations under this Agreement, where such failure shall continue for a period of ten (10) days after delivery of written notice of demand therefor from Seller to Buyer; provided, however, that if more than ten (10) days are reasonably required to cure such failure, then Buyer shall not be deemed to be in default thereof if Buyer, in good faith, has commenced such cure within said ten (10) day period and thereafter diligently prosecutes such cure to completion and completes such cure prior to Closing. 14.2(b) The occurrence of any one or more of the following events shall constitute a material default of this Agreement by Seller ("Seller's Event of Default"): (i) The material breach of any representation or warranty by Seller hereunder unless such breach is cured prior to the Closing Date; (ii) The failure by Seller to consummate the transactions contemplated by this Agreement in violation of the terms of this Agreement; (iii) The failure by Seller to perform any other of its obligations under this Agreement, where such failure shall continue for a period of ten (10) days after delivery of written notice of demand therefor from Buyer to Seller; provided, however, that if more than ten (10) days are reasonably required to cure such failure, then Seller shall not be deemed to be in default thereof if Seller, in good faith, has commenced such cure within said ten (10) day period and thereafter diligently prosecutes such cure to completion and completes such cure prior to Closing. 14.2(c) Seller acknowledges that the Station is of a special, unique, and extraordinary character, and that any breach of this Agreement by Seller could not be compensated for by damages. Accordingly, upon the occurrence of a Seller's Event of Default, Buyer shall be entitled, in addition to any other remedies that it may have, to enforcement of this Agreement (subject to obtaining any required approval of the FCC) by a decree of specific performance or injunctive relief requiring Seller to fulfill its obligations under this Agreement. In any action to specifically enforce Seller's obligation to close the transaction contemplated by this Agreement, Seller shall waive the defense that there is an adequate remedy at law or in equity and agrees that Buyer shall be entitled to obtain specific performance of Seller's obligation to close hereunder without being required to prove actual damages, and reasonable attorney's fees. As a condition to seeking specific performance, Buyer shall not be required to tender the Purchase Price, but shall be required to demonstrate that Buyer is ready, willing and able to tender the Purchase Price and consummate the purchase of the Station as contemplated hereunder. 29 14.2(d) Upon the occurrence of a Buyer's Event of Default, Seller shall have only the rights set forth in Section 14.1 and Section 2.2. 15. ACCESS TO BOOKS AND RECORDS. After the Closing Date, Buyer and Seller shall each allow the other reasonable access during normal business hours upon reasonable prior notice to their respective books and records pertaining to the operation of the Stations prior to the Closing Date and shall retain such records for a period of not less than three (3) years after the Closing Date. 16. NOTICES. All notices and other communications hereunder shall be in writing and be deemed to have been duly given if delivered personally or by overnight courier or sent by telecopy or mailed by registered mail, postage prepaid, addressed as follows: (a) If to Seller, to: Mrs. Faye Scott 1018 Timber Lane Pottstown, PA 19464 Personal and Confidential and Mr. Mitchell Scott 1018 Timber Lane Pottstown, PA 19464 Personal and Confidential with a copy to: Bernard Eizen, Esq. Eizen, Fineburg & McCartney Two Commerce Square, Suite 3410 2001 Market Street Philadelphia, PA 19103 30 (b) If to Buyer, to: Louis F. Mercatanti, Jr. Nassau Broadcasting Partners, L.P. 600 Alexander Road Princeton, NJ 08540 with a copy to: Mark D. Schorr, Esq. Sterns & Weinroth A Professional Corporation 50 West State Street, Suite 1400 P.O. Box 1298 Trenton, NJ 08607-1298 or such other address with respect to any party hereto as such party may from time to time notify (as provided above) to the other party hereto. Any such notice, demand or communication shall be deemed to have been given (i) if so mailed, as of the close of the third business day following the date so mailed, and (ii) if personally delivered or otherwise sent as provided above, on the date delivered or sent if sent by telecopy and on the next business day after the date sent in all other cases. 17. CONTROL OF STATIONS Between the date hereof and the Closing Date, Seller shall manage and control the operation of the Stations. 18. EXPENSES. Unless otherwise agreed to in writing by the parties hereto, each party shall pay its own costs and expenses, including any and all legal and accounting fees, of its performance and compliance with all conditions and agreements contained herein on its or their part to be performed or complied with. 19. BROKERS. Buyer and Seller acknowledge and represent and warrant to each other than Americom is the sole "Broker" in this transaction. Buyer and Seller each represent to the other that there is no other finder, consultant or broker involved in this transaction and that they have not agreed to pay any other finder, consultant or broker fee in connection with this transaction. If any other finder, consultant or broker claims a fee, the party whose actions led to that claim will bear sole responsibility for paying or settling that claim 31 and shall indemnify the other party against the same. Seller shall be solely responsible for the Broker's fees. 20. DISCLOSURE OF EXHIBITS AND SCHEDULES. Notwithstanding anything to the contrary contained in this Agreement or in any of the Exhibits and Schedules, any information disclosed in one Exhibit or Schedule, as the case may be, shall be deemed to be disclosed in all Exhibits and Schedules. Certain information set forth in the Exhibits and Schedules, as the case may be, is included solely for informational purposes and may not be required to be disclosed pursuant to this Agreement. The disclosure of any information shall not be deemed to constitute an acknowledgment that such information is required to be disclosed in connection with the representations and warranties made by Seller in this Agreement or is material, nor shall such information be deemed to establish a standard of materiality. Except as expressly set forth in this Agreement, there are no representations or warranties, express or implied, being made by Seller. 21. SECTION HEADINGS. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 22. ENTIRE AGREEMENT; FILINGS. This Agreement and all Schedules and Exhibits attached hereto constitute the entire agreement of the parties with respect to the subject matter hereof and supersede all prior understandings and agreements among the parties, whether oral or written, contain the entire understanding of the parties and shall not be changed, modified, amended, extended, terminated, waived or discharged except by subsequent instrument in writing signed by the parties hereto. To the extent permitted by the FCC, the Schedules shall not be filed with the FCC or otherwise disclosed or made public. 23. COUNTERPARTS. This Agreement may be signed upon any number of counterparts with the same effect as if the signature to each counterpart were on the same instrument. 24. SURVIVAL. The provisions hereof, which by their terms are to be performed or observed after the Closing Date, shall survive the Closing hereunder in accordance with the terms of this Agreement and shall be binding upon and inure to the benefit of all of the parties hereto, their heirs, legal representatives, successors and assigns. 32 25. CONFIDENTIALITY. Neither party shall make any announcement or disclose to the press or others without Seller's consent (which shall not be unreasonable withheld or delayed) as to the purchase/sale of the Stations prior to the filing of applications with the FCC and its first public announcement of the assignment application. It is understood that the foregoing non-disclosure requirement is not intended to preclude Buyer from having discussions with financial entities, consultants, attorneys and prospective management level employees outside the Stations who will also be advised of the need and agreement for deferred disclosure. 26. ASSIGNABILITY. Neither the Agreement nor any rights or obligations hereunder may be assigned by Buyer or Seller without the express prior written consent of the other party. Except as provided otherwise herein, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the parties. 27. GOVERNING LAW. This Agreement shall be governed by, construed (both as to validity and performance) and enforced in accordance with the laws of the State of New Jersey applicable to agreements made and to be performed wholly within such jurisdiction. 28. SEVERABILITY. Any provision of this Agreement which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such unenforceability without invalidating the remaining provisions hereof, and any such unenforceability in any jurisdiction shall not invalidate or render unenforceable such provisions in any other jurisdiction. To the extent permitted by applicable law, the parties hereto hereby waive any provision of law now or hereafter in effect which renders any provision hereof unenforceable in any respect. 39. FURTHER ACTIONS. From time to time before, at and after the Closing, each party, at its expense and without further consideration, will execute and deliver such documents to the other party as the other party may reasonably request in order more effectively to consummate the transactions contemplated hereby. 33 IN WITNESS WHEREOF, this Asset Purchase Agreement has been duly executed by the parties hereto as of the date first above written. GREAT SCOTT BROADCASTING, LTD. By: GREAT SCOTT BROADCASTING, INC. Its General Partner By: /s/ Faye Scott --------------------------------- Name: Faye Scott, President. ------------------------------- NASSAU BROADCASTING PARTNERS, L.P. By: Nassau Broadcasting Partners, Inc., its General Partner By: /s/ Louis F. Mercatanti, Jr. ---------------------------- Louis F. Mercatanti, Jr., President 34 EX-2.7 8 0008.txt AMENDMENT TO ASSET PURCHASE AGMT & ESCROW AGMT EXHIBIT 2.7 AMENDMENT TO ASSET PURCHASE AGREEMENT AND ESCROW AGREEMENT ---------------------------------------------------------- THIS AMENDMENT ("Amendment") dated and effective as of the 17th day of January, 1997, by and between Great Scott Broadcasting, Ltd., a Pennsylvania limited partnership ("Seller"), and Nassau Broadcasting Partners, L.P., a Delaware limited partnership ("Buyer"). STATEMENT OF FACTS ------------------ 1. Buyer and Seller entered into an Asset Purchase Agreement dated as of August 30, 1996 ("Agreement") pursuant to which Seller agreed to sell certain radio stations licensed to Trenton, New Jersey to Buyer and simultaneously therewith made a down payment of $750,000 toward the purchase price under the Agreement ("Escrow Amount"). 2. Buyer, Seller and the Escrow Agent entered into an Escrow Agreement with respect to the Escrow Amount ("Escrow Agreement"). 3. At the request of Buyer, Buyer and Seller have agreed to amend the Agreement and the Escrow Agreement. For the purpose of this Amendment, capitalized terms shall have the meanings ascribed to them in the Agreement, unless otherwise defined. NOW, THEREFORE, in consideration of the sum of Ten ($10.00) Dollars, paid by Buyer to Seller, and for other good and valuable consideration, the mutual receipt and mutual sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Section 2.2 of the Agreement shall be deleted in its entirety and replaced by the following: 2.2(a) Earnest Money Deposit: Liquidated Damages. Upon the ----------------------------------------- execution of this Amendment, the Escrow Agent shall release the Escrow Amount to Seller. 2.2(b) Additional Escrow Amount. Upon execution of this ------------------------- Amendment, Buyer shall deposit $750,000.00 with the Escrow Agent ("Additional Escrow Amount") to be held pursuant to the Escrow Agreement as amended by this Amendment. The Additional Escrow Amount is to be held by the Escrow Agent in an interest-bearing account until the New Closing Date, as hereinafter defined, with all interest thereon accruing to the benefit of Buyer pursuant to the terms of the Escrow Agreement, as amended by this Amendment, and all interest already accrued on the Escrow Amount. The Additional Escrow Amount shall not include accrued interest. 2. Section 2.3(a) and 2.3(b) of the Agreement shall be deleted and replaced with the following: 2.3 Method of Payment of Purchase Price. The Purchase Price ------------------------------------ shall be paid as follows: 2.3(a) Additional Escrow Amount. Escrow Agent shall ------------------------- deliver the Additional Escrow Amount to Buyer on the New Closing Date. 2.3(b) Closing. In addition the Additional Escrow Amount -------- to be delivered to Seller by the Escrow Agent pursuant to Subsection 2.3(a) of this Amendment, Buyer shall deliver to Seller at Closing one or more certified cashier's checks or wire transfers payable as directed by Seller in the aggregate amount of Thirteen Million Five Hundred Dollars ($13,500,000.00), less the total of any Advances paid pursuant to Paragraph 2.7. 3. New Sections 2.5, 2.6, 2.7 and 2.8 shall be added to the Agreement as follows: 2.5 Liquidated Damages. Buyer acknowledges that the Escrow ------------------- Amount, the Additional Escrow Amount, the Adjustments, as defined in Section 2.6 of this Amendment and the Advances, as defined in Section 2.7 of this Amendment, are being paid as a condition of obtaining an extension of the Closing Date of the Agreement. Buyer shall not seek to obtain any portion of the Escrow Amount delivered to Seller, except that Buyer may seek recovery of such amount if the Seller Intentionally and willfully refuses or falls to deliver any documents it is required to deliver at Closing or to discharge any of its Closing obligations. In the event of termination of the Agreement for any reason other than as set forth in the next sentence, the Additional Escrow Amount, together with any and all interest accrued thereon, and the Adjustments and Advances, shall be returned to Buyer. In the event of termination of the Agreement by Seller as the result of a failure of a condition set forth in Section 14.1(d) of the Agreement or failure by Buyer to fulfill its obligations under this Amendment, and Seller is not in breach of its obligations and representations under this Amendment and the Agreement, Seller shall be entitled to, as liquidated damages, and not as a penalty, an amount equal to the greater of: (i) Two Million Dollars ($2,000,000); or (ii) the aggregate amount of the Escrow Amount, the Additional Escrow Amount, the Advances and the Adjustments. The parties agree that such amounts constitute a reasonable sum considering all of the circumstances existing on the date of this Amendment, including the relationship of the sums to the range of harm to Seller that could reasonably be anticipated and the anticipation that proof of actual damages would be costly and inconvenient. In placing their initials at the place provided below, Buyer and Seller each specifically confirms: the accuracy of the statements made above and the fact that each was represented by counsel who explained the consequences of this liquidated damages provision at the time this Amendment was made. SELLER INITIAL HERE [INITIALS] ----------- BUYER INITIAL HERE [INITIALS] ------------ 2.6 Earnings Adjustments. In addition to all other consideration payable to -------------------- Seller under this Agreement, Buyer shall pay the following adjustments in the earnings of Seller beginning on February 14, and thereafter on March 14, April 14, May 14 and May 31, 1997 through the New Closing Date if same shall occur earlier, $60,000 for each of the following time periods: January 14, 1997 through February 14, 1997; February 15 through March 14, 1997; March 15 through April 14, 1997; and April 15 through May 14, 1997; and a $30,000 adjustment shall be paid for the period from May 15, 1997 through May 31, 1997. Each such payment shall be referred to as an "Adjustment," and each time period shall be referred to as an "Adjustment Period." If the Closing occurs before the end of any Adjustment Period, the amount of the Adjustment shall be reduced proportionately to reflect this. (For example, if the 3 Closing occurs on January 15, 1997, Buyer shall be obligated to pay an additional 1/31 of $60,000.) 2.7 Advances on Purchase Price. Buyer shall pay $100,000 to -------------------------- Seller on each of the following dates if the Closing shall not have occurred on or before those dates: February 14, 1997; March 14, 1997; April 14, 1997; and May 14, 1997. Such payments shall be referred to collectively as the "Advances." The Advances shall be credited toward the Purchase Price consistent with Section 2.3(b). 2.8 Buyer's Option to Make Payment of Additional Escrow Amount ---------------------------------------------------------- Directly to Seller. Upon execution of this Amendment, at its option, ------------------ Buyer may pay the sum of Seven Hundred Fifty Thousand Dollars ($750,000.00) directly to Seller, and, in such case, the Escrow Amount currently held by the Escrow Agent shall be treated as the Additional Escrow Amount. 4. Section 10.1 of the Agreement shall be deleted and replaced by the following: 10.1 Closing Date and Real Property Transfer Date. The Closing -------------------------------------------- of the transactions contemplated herein, other than for the transfer of the Real Property, shall be held on a date and time, specified by Buyer in writing to Seller, which is on or before the earlier of: (i) the second business day following completion of Buyer's currently pending bond financing proceedings (projected by Buyer to be completed by March 31, 1997) or any substitute therefor; or (ii) May 31, 1997 ("New Closing Date"). Notwithstanding anything contained in this Section 10.1 of the Amendment, if the Closing does not occur by May 31, 1997, then either Seller or Buyer shall have the right to terminate the Agreement subject to the terms of the Agreement and this Amendment. The Real Property Transfer Date shall be the third anniversary of the New Closing Date. 5. Buyer acknowledges that it has completed all due diligence and has found no exceptions, except that the following due diligence has not yet been completed, the environmental audit pursuant to Section 7.3(c) of the Agreement and the engineering Inspection pursuant to Section 7.3(d) of the Agreement. 4 6. Section 7.1 of the Agreement shall be deleted and replaced with the following: 7.1 Access and Information. Seller shall provide Buyer and its ---------------------- accountants continued access to its books and records as they pertain to the Stations for the purpose of conducting an audit of the operations and results of the Stations for the period through December 31, 1996. Buyer shall reimburse Seller for any overtime payroll and related expenses heretofore or hereafter incurred as a result of such audit. 7. Section 10.4(a)(i) and (ii) of the Agreement shall be deleted and replaced with the following: (i) Executed instructions to Escrow Agent, directing it to release to Seller the balance of the Additional Escrow Amount; (ii) Thirteen Million Five Hundred Thousand Dollars ($13,500,000), less the total of any advances paid pursuant to Section 2.7, by bank, cashier's check, certified check or wire transfer at Seller's election. 8. All references in the Escrow Agreement to the "Escrow Fund" or the "Escrow Amount" shall now be to the Additional Escrow Amount. Section 2 of the Escrow Agreement shall be deleted in its entirety and replaced by the following: 2. Distribution of the Additional Escrow Amount -------------------------------------------- (a) The Escrow Agent shall hold the Additional Escrow Amount and disburse it in a manner consistent with Section 2 of this Amendment. On the Closing Date or May 31, 1997, whichever shall first occur, Seller shall send to the Escrow Agent telecopied instructions authorizing the Escrow Agent to pay the balance of the Additional Escrow Amount to Seller and to pay the balance of the accrued interest on the Additional Escrow Amount to Buyer. The Escrow Agent shall, as soon as practicable, comply with the instructions received from Seller. (b) In the event that Seller shall give the Escrow Agent written notice stating that: (i) the Agreement has been terminated by Seller consistent with the Agreement due to a breach or default in any material respect of the representations, warranties or obligations by Buyer under the terms of the Agreement; (ii) Seller is entitled to the Additional Escrow Amount as liquidated damages in accordance with Section 3 of this Amendment; and (iii) Seller has given notice of such claim to Buyer, then the Escrow Agent shall promptly give Buyer a copy of such written notice. At any time on or before the fifth day after such notice from the Escrow Agent, Buyer may contest the claim of Seller to the Additional Escrow Amount by written notice delivered to Seller and Escrow Agent setting forth the grounds for such dispute. Promptly after the expiration of five (5) days from the date of such notice to Buyer, if the Escrow Agent shall not have, during such five (5) day period, received from Buyer written notice disputing Seller's claim to the Additional Escrow Amount, the Escrow Agent shall pay the Additional Escrow Amount to Seller as a portion of liquidated damages and as the exclusive remedy of Seller and in complete satisfaction of any and all claims against Buyer. If Buyer shall give notice disputing Seller's claim to the Escrow Amount, the Escrow Agent shall retain the Escrow Amount until the dispute is resolved in accordance with this Section 8 of the Amendment. All notices to be delivered or permitted to be delivered under this Section shall be delivered as provided in Section 16 of the Agreement. (c) In the event that Buyer shall give written notice to the Escrow Agent stating: (i) that the Agreement was not consummated for any reason other than a breach or default in any material respect of the representations, warranties or obligations of Buyer; (ii) that Buyer is entitled to the return of the Additional Escrow Amount in accordance with the Agreement or this Amendment; and (iii) that Buyer has given a copy of such notice to Seller, then the Escrow Agent shall promptly deliver a copy of such written notice to Seller. At any time on or before the fifth day after such notice from the Escrow Agent, Seller may contest Buyer's claim to the Additional Escrow Amount setting forth the grounds for such dispute. Promptly after the expiration of five (5) days from the date of such notice to Seller, if the Escrow Agent shall not have, during the five (5) day period, received from Seller written notice disputing Buyer's claim to the Escrow Amount or Additional Escrow Amount, the Escrow Agent shall pay the Additional Escrow Amount to Buyer. If Seller shall give notice disputing Buyer's claim to the Additional Escrow Amount, the Escrow Agent shall retain the Additional Escrow Amount until the dispute is resolved in accordance with Section 8 of the Amendment. All notices given or permitted to be given under this Section shall be given as provided in Section 16 of the Amendment. (d) If the Escrow Agent shall retain the Additional Escrow Amount, or any part of the Additional Escrow Amount, on account of a dispute in accordance with this Section 6 of this Amendment, the Escrow Agent shall make no delivery to or any other disposition of the Additional Escrow Amount until it has received a final court order from a court of competent jurisdiction directing disposition of the Additional Escrow Amount or until it shall receive written instructions of both Buyer and Seller authorizing the release of the Additional Escrow Amount, whichever shall occur earlier. 9. This Amendment may be signed in any number of counterparts with the same effect as if the signature to each counterpart were on the same instrument. 10. Except as modified by this Amendment, the Agreement and the Escrow Agreement, and all of the covenants, agreements, terms, provisions and conditions therein shall remain in full force and effect. The covenants, agreements, terms, provisions and conditions contained in this Amendment shall bind and inure to the benefit of the parties hereto and their respective successors, and, except as otherwise provided in the Agreement and Escrow Agreement, as modified in this Amendment, their respective assigns. 7 In WITNESS WHEREOF, this Amendment has been duly executed by the parties hereto as of the date first above written. GREAT SCOTT BROADCASTING, LTD, By: GREAT SCOTT BROADCASTING. INC. Its General Partner By: /s/ Faye Scott ---------------------------- Name: Faye Scott, President NASSAU BROADCASTING PARTNERS, L.P. By: Nassau Broadcasting Partners, Inc., its General Partner By: /s/ Louis F. Mercatanti, Jr., ------------------------------------ Louis F. Mercatanti, Jr. President Acknowledge and Agreed: EIZEN, FINEBERG & McCARTHEY, P.C., as Escrow Agent By /s/ Bernard Eizen ----------------------------- Bernard Eizen 8 EX-2.8 9 0009.txt 2ND AMENDMENT TO ASSET PURCHASE AGMT & ESCROW AGMT Exhibit 2.8 SECOND AMENDMENT TO ASSET PURCHASE AND ESCROW AGREEMENT ------------------------------------------------------- THIS AMENDMENT ("Second Amendment") dated and effective as of the 1st day of June, 1997, by and between Great Scott Broadcasting, Ltd., a Pennsylvania limIted partnership ("Seller"), and Nassau Broadcasting Partners, LP., a Delaware limited partnership ("Buyer"). STATEMENT OF FACTS ------------------ 1. Buyer and Seller entered into an Asset Purchase Agreement dated as of August 30, 1996 ("Agreement") pursuant to which seller agreed to sell certain radio stations licensed to Trenton, New Jersey to Buyer and simultaneously therewith made a down payment of $750,000 (the "Escrow Amount") toward the purchase price under the Agreement and an Escrow Agreement with respect to the Escrow Amount. 2. On January 17, 1997, Buyer and Seller entered into an Amendment to Asset Purchase Agreement and Escrow Agreement (the "First Amendment"), pursuant to which the Escrow Agent released the Escrow Amount to Seller, and Buyer deposited an additional $750,000 (the "Additional Escrow Amount") with the Escrow Agent. 3. As of the date of this Second Amendment. Buyer has paid to Seller the Escrow Amount, the Earnings Adjustments and the Advances. 4. At the request of Buyer, Buyer and Seller have agreed to further amend the Agreement and the Escrow Agreement. For the purpose of this Second Amendment, capitalized terms shall have the meanings ascribed to them in the Agreement and the First Amendment, unless otherwise defined. 5. Buyer and Seller have this day entered into a Local Marketing Agreement ("LMA"), as part of the consideration for this Second Amendment. NOW, THEREFORE, in consideration of the sum of Ten ($10.00) Dollars, paid by Buyer to Seller, and for other good and valuable consideration, the mutual receipt and mutual sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Section 2.2 of the First Amendment of the Agreement shall be deleted In its entirety and replaced by the following: 2.2 Earnest Money Deposit. Upon the execution of this Second --------------------- Amendment, Escrow Agent shall release the Additional Escrow Amount to Seller, and such amount shall be credited toward the Purchase Price. Accrued interest on the Escrow Amount for the period from August 30, 1996 through January 17, 1997 and the Additional Escrow Amount shall also be credited on account of the Purchase Price. The Escrow Agent shall provide a definitive accounting thereof to the parties. 2. Section 2.3(b) of the Agreement shall be deleted and replaced with the following: 2.3 Method of Payment of Purchase Price. The Purchase Price shall be ----------------------------------- paid as follows: 2.3(a) Additional Deposits. Pursuant to the First Amendment, ------------------- Buyer has released the Escrow Amount and has paid the Advances and Earnings Adjustments to Seller. Pursuant to Section 1 of this Second Amendment, Buyer has released the Additional Escrow Amount to Seller. In addition, Buyer shall deliver to Seller the following payments ("Additional Deposits") in one or more certified or cashier's checks or wire transfers payable as directed by Seller. $3,000,000 on May 31, 1997; $2,000,000 on September 30, 1997: $4,000,000 on December 31, 1997: $1,500,000 on July 1, 1998. 2 2.3(b) Closing. Buyer shall deliver to Seller at Closing one or ------- more certified or cashier's checks or wire transfers payable as directed by Seller in the aggregate amount of Two Million Five Hundred Thousand Dollars ($2,500,000). 2.3(c) Balance of the Purchase Price. In addition to the amounts ----------------------------- set forth in 2.3(a) and (b), Buyer shall pay to Seller an aggregate of Five Million Dollars ($5,000,000) (the "Additional Amount"), payable One Million Dollars ($1,000,000) on January 31, 1999 and Four Million Dollars ($4,000,000) on January 31, 2000, plus interest of 6% per annum from the Closing Date to the date of payment. At Closing, Buyer shall deliver to Seller a promissory note in the form attached hereto as Exhibit A providing for the payment of the Additional Amount, plus --------- interest of 6% per annum (the "Promissory Note"). Buyer shall use its best efforts to obtain the consent of its primary lender, if any, to grant Seller a subordinated security interest in the Assets to secure payment of the Promissory Note, such security interest to be subordinate only to Buyer's primary lender. 2.3(d) Payment of Purchase Price. All amounts set forth in this ------------------------- Section 2 shall be credited toward the Purchase Price when paid and shall constitute full payment of the Purchase Price. 3. Section 10.1 of the Agreement shall be deleted and replaced by the following: 10.1 Closing Date and Real Property Transfer Date. The Closing of the -------------------------------------------- transactions contemplated herein, other than for the transfer of the Real Property, shall be held on a date and time, specified by Buyer in writing to Seller, which is on or before January 31, 1999 ("New Closing Date"). The Real Property Transfer Date shall be January 31, 2000 (the "Real Property Transfer Date"). 4. Sections 10.4(a)(i) of the Agreement shall be deleted and Section 10.4(a)(ii) of the Agreement shall be deleted and replaced with the following: (ii) Two Million Five Hundred Thousand Dollars ($2,500,000), by bank, cashier's check, certified check or wire transfer at Seller's election 3 (provided all Additional Deposits shall have been received by Seller timely, or any delay or default waived by Seller in writing). 5. Upon execution of this Second Amendment, all amounts held by the Escrow Agent pursuant to the Escrow Agreement will be released. Pursuant to the Section 3 of the Escrow Agreement, the Escrow Agreement will terminate and Escrow Agent shall have no further responsibility pursuant to the Escrow Agreement and no liability to the Buyer and the Seller. 6. References in the Agreement, as amended, to Liquidated Damages under Section 2.2 shall mean new Section 2.5 of this Second Amendment. Section 2.5 of the Agreement and the First Amendment shall be deleted and replaced with the following: 2.5 Liquidated Damages. Buyer acknowledges that the Escrow Amount. the ------------------ Additional Escrow Amount, the Adjustments, the Advances and the Additional Deposits have been paid and are being paid as conditions of Buyer obtaining extensions of the Closing Date of the Agreement. Buyer shall not seek to obtain any portion of such amounts delivered to Seller, except that Buyer may seek recovery of such amounts if Seller intentionally and willfully refuses or fails to deliver any documents it is required to deliver at the Closing or to discharge any of its Closing Obligations. In the event termination of the Agreement by Seller as the result of failure of a condition set forth in Section 14.1(d) of the Agreement or failure by Buyer to fulfill its obligations under this Second Amendment, and Seller is not in breach of its obligations and representations under this Second Amendment and the Agreement, Seller shall be entitled to keep, as liquidated damages and not as a penalty, all of the Escrow Amount, the Additional Escrow Amount, the Adjustments, the Advances and the Additional Deposits paid up until the time of termination of the Agreement. The parties agree that such amounts constitute reasonable and just compensation considering all the circumstances existing on the date of this Second Amendment, including the relationship of the sums to the range of harm to Seller that could reasonably be anticipated and the anticipation that proof of actual damages would be very difficult or impossible to establish. In placing their initials at the place provided below, Buyer and Seller each specifically confirms the accuracy of the statements made above and the fact that each was represented by 4 counsel who explained the consequences of this liquidated damages provision at the time this Second Amendment was made. SELLER INITIAL HERE [INITIALS] --------------- BUYER INITIAL HERE [INITIALS] --------------- 7. Buyer acknowledges and agrees that the representations and warranties of Seller contained in Sections 4.2(b) and 4.3 of the Agreement have been satisfied as of the date of this Second Amendment and shall be of no further force or effect. 8. Buyer and Seller acknowledge and agree that Section 11.1 of the Agreement is void and shall be of no further force or effect. 9. Buyer, as Broker under the LMA agrees not to alter the format of the Stations until January 1, 1998 and may do so at that time if it has made all payments through the $4,000,000 payment to be made on December 31, 1997. 10. Buyer shall pay to Seller reasonable counsel fees for work necessitated by Buyer's failure to close on May 31, 1997. Buyer shall not be required to make such payment until Seller has documented the work for which it seeks fees by providing sufficient detail of the services of its attorneys for which it seeks payment from Buyer. 11. Buyer and Seller acknowledge that the FCC has approved the sale of the Stations and extended its approval through May 31, 1997. Any further extensions of the FCC approval shall be the sole responsibility of Buyer, and Seller agrees to use its reasonable best efforts to assist Buyer in obtaining any further extension. In the event that an extension of FCC approval cannot be obtained through January 31, 1999, Buyer shall be responsible for the recommencement of the application process and shall pay 5 all fees of Seller and its legal counsel incurred in utilizing its best efforts to assist Buyer in obtaining said approval. 12. Solely in the event that Buyer and Seller are unable to close on the purchase and sale of the Stations on the New Closing Date by reasons of the inability to obtain the consent of the FCC or other future required governmental approval, through no fault of Buyer and if Buyer is otherwise in full compliance with the Agreement and this Second Amendment, then the parties agree as follows: (a) Seller shall list the Stations for sale and make a good faith effort to sell the Stations to a third party for a period of three years following the New Closing Date. (b) Seller shall accept a bona-fide offer from a third-party purchaser to purchase the Stations from Seller at not less than 85% of the fair market value as determined by a nationally recognized media broker selected by Seller, in its sole discretion, or an amount approved by Buyer within the time period specified in this Section 12(a), above, provided that Seller need not accept a bona fide offer if fair market value plus amounts paid by Buyer and credited toward the Purchase Price do not equal Twenty Million Dollars ($20,000,000). (c) Upon the closing of the sale of the Stations to the third-party purchaser, Seller shall reimburse Buyer for amounts, not to exceed the sum of the Deposit and the Additional Deposits. received by Seller in excess if any of the product of Twenty Million Dollars ($20,000,000) multiplied by a fraction not less than 1/1, the numerator of which is the consumer price index for all urban consumers published by the Bureau of Labor Statistics (the "CPI-U") for January 1999 and the denominator is 6 the CPI for March 1997, over the aggregate of (i) amounts paid by Buyer and credited toward the Purchase Price pursuant to this Second Amendment and (ii) the amount realized (net of all expenses and costs) by Seller from the third-party purchaser pursuant to Section 13(b) above. Attached hereto as Exhibit B is an example illustrating the application of this Section 12. 13. This Second Amendment may be signed in any number of counterparts with the same effect as if the signature to each counterpart were on the same instrument. 14. Except as modified by this Second Amendment, the Agreement and the First Amendment, and all of the covenants, agreements, terms, provisions and conditions therein shall remain in full force and effect. The covenants, agreements, terms, provisions and conditions contained in this Second Amendment shall bind and inure to the benefit of the parties hereto and their respective successors, and, except as otherwise provided in the Agreement and the First Amendment, as modified in this Second Amendment, their respective assigns. 7 IN WITNESS WHEREOF, this Second Amendment has been duly executed by the parties hereto as of the date first above written. GREAT SCOTT BROADCASTING, LTD. By: GREAT SCOTT BROADCASTING, INC. Its General Partner By: /s/ Faye Scott ------------------------------------ Faye Scott, President NASSAU BROADCASTING PARTNERS, L.P. By: Nassau Broadcasting Partners, Inc., its General Partner By: /s/ Louis F. Mercatanti, Jr. ------------------------------------ Louis F. Mercatanti, Jr., President Acknowledged and Agreed: EIZEN, FINEBURG & McCARTHY, P.C., as Escrow Agent By: /s/ Herbert F. Fineburg, Treasurer ----------------------------------- 8 EX-2.9 10 0010.txt 3RD AMENDMENT TO ASSET PURCHASE AGMT Exhibit 2.9 THIRD AMENDMENT TO ASSET PURCHASE AGREEMENT ------------------------------------------- THIS AMENDMENT ("Third Amendment") dated and effective as of the 17th day of February, 1998, by and between Great Scott Broadcasting, Ltd., a Pennsylvania limited partnership ("Seller"), and Nassau Broadcasting Partners, L.P., a Delaware limited partnership ("Buyer"). STATEMENT OF FACTS ------------------ 1. Buyer and Seller entered into an Asset Purchase Agreement dated as of August 30, 1998 ("Agreement") pursuant to which Seller agreed to sell certain radio stations licensed to Trenton, New Jersey to Buyer and simultaneously paid the Escrow Amount toward the purchase price under the Agreement. 2. On January 17, 1997, Buyer and Seller entered into the First Amendment, pursuant to which the Escrow Agent paid the Escrow Amount to Seller, and Buyer deposited an additional $750,000 (the "Additional Escrow Amount") with the Escrow Agent. 3. On June 1, 1997, Buyer and Seller entered into the Second Amendment, pursuant to which the Escrow Agent released the Additional Escrow Amount to Seller. 4. As of the date of this Third Amendment, Buyer has paid to Seller the Escrow Amount, the Earnings Adjustments, the Advances, and Additional Deposits pursuant to the Second Amendment. Buyer has also paid $1,000,000 toward the Additional Deposit due on December 31, 1997 under Section 2 of the Second Amendment, which payment was confirmed in a letter from Buyer dated October 20, 1997. 5. Buyer and Seller have agreed to further amend the Agreement. For the purpose of this Third Amendment, capitalized terms shall have the meanings ascribed to them in the Agreement, the First Amendment and the Second Amendment, unless otherwise defined. 6. On June 1, 1997, Buyer and Seller also entered into a Local Marketing Agreement ("LMA"), as part of the consideration for the Second Amendment. NOW, THEREFORE, in consideration of the sum of Ten ($10.00) Dollars, paid by Buyer to Seller, and for other good and valuable consideration, the mutual receipt and mutual sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Purchase Price. Section 2.3(a) and Section 2.3(b) of the Agreement, as -------------- amended, shall be deleted in their entirety and replaced by the following: 2.3(a) Additional Deposits. The Additional Deposits shall be paid as ------------------- follows: $1.0 million on January 2, 1998; $2.0 million on March 1, 1998; and $1.5 million on July 1, 1998. Such payments may be made by certified or cashier's check or wire transfers. 2.3(b) Closing. Buyer shall deliver to Seller at Closing one or more ------- certified checks or wire transfers payable as directed by Seller in the aggregate amount of Two Million Six Hundred Thousand Dollars ($2,600,000). Seller acknowledges that Buyer has paid the Additional Deposits due on January 2, 1996 and March 1, 1998. 1 2. Interest. Buyer shall pay to Seller interest in the amount of eight -------- percent (8%) per annum on the $2.0 million payment due on March 1, 1998 pursuant to Section 1 of this Third Amendment. Such interest is payable beginning on January 1, 1998 and shall run until payment of the $2.0 million due on March 1, 1998 payment. 3. Format and Call Letters. Buyer agrees not to make further changes to ----------------------- the format or the call letters of the Stations until it has made the payment due March 1, 1998. The call letters will be changed in the manner set forth on Exhibit A. Seller agrees to take all action reasonably required of it to assist Buyer in changing the call letters, including executing documents required to be filed with or submitted to the Federal Communications Commission ("FCC"). 4. Acknowledgment. Buyer acknowledges and agrees that the representation -------------- of Seller in Section 5.1 of the LMA that the Stations operate in accordance with the authorizations issued by the FCC has been satisfied as of the date of the Third Amendment. Nothing in this Third Amendment shall have the effect of altering Seller's responsibility for any aspect of the operation of the Stations or the Buyer's acknowledgment and agreement in the Second Amendment that Section 4.2 and 4.3(b) of the Agreement have been satisfied. 5. Counterparts. This Third Amendment may be signed in any number of ------------ counterparts with the same effect as if the signature to each counterpart was on the same instrument. 6. Effect. Except as modified by this Third Amendment, the Agreement, the ------ First Amendment and the Second Amendment, and all of the covenants, agreements, 2 terms, provisions and conditions contained therein shall remain in full force and effect. The covenants, agreements, terms, provisions and conditions contained in this Third Amendment shall bind and inure to the benefit of the parties hereto and their respective successors, and, except as otherwise provided in the Agreement, the First Amendment and the Second Amendment, as modified in this Third Amendment, their respective assigns. IN WITNESS WHEREOF, this Third Amendment has been duly executed by the parties hereto as of the date first above written. GREAT SCOTT BROADCASTING, LTD. By: GREAT SCOTT BROADCASTING, INC. Its General Partner By: /s/ Faye Scott ------------------------------ Faye Scott, President NASSAU BROADCASTING PARTNERS, L.P. By: Nassau Broadcasting Partners, Inc. its General Partner By: /s/ Christina Christensen ------------------------------ Christina Christensen, Assistant Secretary 3 EX-2.10 11 0011.txt 4TH AMENDMENT TO ASSET PURCHASE AGMT Exhibit 2.10 FOURTH AMENDMENT TO ASSET PURCHASE AGREEMENT -------------------------------------------- THIS AMENDMENT ("Fourth Amendment") dated and effective as of the 25th day of November, 1998, by and between Great Scott Broadcasting, Ltd., a Pennsylvania limited partnership ("Seller"), Nassau Broadcasting Partners, L.P., a Delaware limited partnership ("Buyer") and with respect to Paragraph 3 only, Eizen Fineburg & McCarthy, as Escrow Agent ("Escrow Agent"). STATEMENT OF FACTS ------------------ 1. Buyer and Seller entered into an Asset Purchase Agreement dated as of August 30, 1996 ("Original Agreement"), pursuant to which, inter alia Seller agreed to sell certain radio stations licensed to Trenton, New Jersey to Buyer and simultaneously paid the Escrow Amount toward the purchase price under the Agreement. 2. On January 17, 1997, Buyer and Seller entered into the First Amendment (the "First Amendment"), pursuant to which, inter alia, the Escrow Agent paid the Escrow Amount of $750,000 to Seller, and Buyer deposited an additional $750,000 (the "Additional Escrow Amount") with the Escrow Agent. 3. On June 1, 1997, Buyer and Seller entered into the Second Amendment (the "Second Amendment"), pursuant to which, inter alia, the Escrow Agent released the Additional Escrow Amount to Seller, and a Local Marketing Agreement ("LMA"). 4. On February 17, 1998, Buyer and Seller entered into the Third Amendment (the "Third Amendment", and together with the Original Agreement, the First Amendment and the Second Amendment, the "Agreement"), pursuant to which the schedule of payment of the Purchase Price was amended. 1 5. As of the date of this Fourth Amendment, Buyer has paid to Seller the Escrow Amount, the Additional Escrow Amount and Additional Deposits on account of the Purchase Price, in the aggregate amount of Twelve Million Four Hundred Thousand Dollars ($12,400,000.00). 6. Buyer and Seller have agreed to further amend the Agreement to provide for the extension of the New Closing Date in part because the FCC has not consented to the Closing on or before January 31, 1999. For purposes of this Fourth Amendment, capitalized terms shall have the meanings ascribed to them in the Agreement. NOW, THEREFORE, in consideration of the sum of Ten ($10.00) Dollars, paid by Buyer to Seller, and for other good and valuable consideration, the mutual receipt and mutual sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Purchase Price. Sections 2.3(b) and 2.3(c) of the Agreement, as -------------- amended, shall be deleted in their entirety and replaced by the following: 2.3(b) Closing. Buyer shall deliver to Seller at Escrow Closing ------- one or more wire transfers payable as directed by Seller in the aggregate amount of Two Million Six Hundred Thousand Dollars ($2,600,000)("Escrow Closing Payment"). 2.3(c) Balance of the Purchase Price. In addition to the amount ----------------------------- set forth in Paragraph 2.3(b), Buyer shall pay to Seller an aggregate of Five Million Dollars ($5,000,000)(the "Additional Amount"), payable by wire transfer One Million Three Hundred Thousand Dollars ($1,300,000) on the Escrow Closing Date (as defined below) and the balance of the Additional Amount, plus interest of 3% per annum from the Escrow Closing Date, on the earlier of September 30, 1999 or the Real Property Transfer Date, less any LMA Payments made from the Escrow Closing Date of the Real Property Closing Date. On the Escrow Closing Date, Buyer shall deliver to Seller a promissory note in the form attached hereto as Exhibit A providing for the payment --------- of 2 $3,700,000.00 plus interest of 3% per annum on the outstanding amount ("Promissory Note"). Seller acknowledges that Buyer has paid the Additional Deposits due through and including July 1, 1998. 2. Closing Date. Section 10.1 of the Agreement shall be deleted and ------------ replaced by the following: 10.1 Closing Date and Real Property Transfer Date. The Escrow -------------------------------------------- Closing of the transactions contemplated herein, other than the transfer of the Real Property, shall be held on February 8, 1999 at 1:00 p.m. at the offices of Sterns & Weinroth (the "Escrow Closing Date"). The Closing of the transactions contemplated herein shall be the Escrow Release Date (as defined below) The Real Property Transfer Date shall be September 30, 1999 (the "Real Property Transfer Date"), provided, however, if the FCC has not approved the transfer of the Licenses by September 30, 1999, the Real Property Transfer Date shall be the date upon which the FCC consents to such transfer. At Buyer's option, if the FCC has consented to the transfer of the Licenses, Buyer may close on the transfer of the Real Estate on a date Buyer specifies which is on or prior to September 30, 1999, in which event such earlier date shall be deemed the Real Property Transfer Date, by delivering to Seller one or more certified checks or wire transfers in the aggregate amount of Three Million Seven Hundred Thousand Dollars ($3,700,000), less the applicable credit for LMA payments pursuant to Section 1, and any then prepaid tower lease payments, and other customary closing adjustments. 3. Closing in Escrow. The Escrow Closing shall take place on the ----------------- Escrow Closing Date as follows: a. The Escrow Release Date shall be the day after the date upon which initial FCC approval for the transfer of the Licenses is obtained: b. On the Escrow Closing Date, Buyer and Seller shall execute all documents and instruments they are required to deliver to each other on the Closing Date (except counsel opinions which shall be delivered in the form of final only) pursuant to the Agreement (the "Closing Documents") and deliver 3 them to Escrow Agent. Upon the Escrow Release Date, Escrow Agent shall release the Closing Documents deliverable to Buyer and Seller, respectively; provided, however, the Assignment of Tower Leases shall not be released to Buyer until the Additional Amount is paid in full. c. Buyer and Seller shall be bound by the LMA so long as Buyer is in compliance therewith and continues to abide by this Agreement. If Buyer is in compliance with this Asset Purchase Agreement, as amended, then all payments Buyer makes after the Escrow Closing Date (except those payments which are reimbursements for Seller's costs and other costs under Paragraph 8 of the LMA) shall be credited toward the Additional Amount not to exceed $3,700,000. After the Additional Amount is paid in full, the LMA payment shall be those payments which are reimbursements for Seller's costs and other costs under Paragraph 8 of the LMA, which shall continue the LMA is terminated. Provided Escrow Agent complies with the terms of this Agreement, Buyer and Seller jointly and severally hereby indemnify and hold the Escrow Agent harmless from and against any and all claims, actions, demands, lawsuits, damages, costs, expenses (including, without limitation, court costs, attorneys' fees, and accountants' fees) and liabilities that may be imposed as a consequence of the performance of its duties as Escrow Agent hereunder, including without limitation, any litigation arising from this Agreement or the subject matter hereof; excepting however Escrow Agent's willful misconduct under this Agreement. In the event of a dispute as to the duties of Escrow 4 Agent, Escrow Agent may transfer the Closing Documents to or seek instructions from any court of competent jurisdiction selected by Escrow Agent. Buyer and Seller shall pay all costs and reasonable fees of Escrow Agent, as such costs are incurred. 4. Denial of FCC Consent. (a) The introductory sentence and --------------------- subparagraphs (a) and (b) of Paragraph 12 of the Second Amendment shall be deleted and replaced by the following: 12. In the event that (i) Buyer and Seller are unable to close on the purchase and sale of the Stations by reason of the denial by the FCC of such transfer, through no fault of Buyer and if Buyer is otherwise in full compliance with the Agreement; or (ii) if the FCC consented to the transfer of the Licenses and subsequently rescinds such consent through no fault of Buyer and if Buyer is otherwise in full compliance with this Agreement, and the period within which Buyer may lawfully appeal to any agency or court from or challenge the FCC's decision set forth in (i) or (ii) has expired, then the parties agree as follows: (a) Seller shall list the Stations for sale and make a good faith effort to sell the Stations to a third party for a period of three years following the expiration date of the final appeal period following the denial or revocation of approval by the FCC. The Buyer shall have the right to participate in the marketing of the Stations by presenting prospective purchasers to Seller, and Seller shall not unreasonably reject such prospective purchasers. Buyer shall be responsible for all remarketing costs and all reasonable expenses of Seller with respect to the remarketing of the Stations. (b) Seller shall accept a bona-fide offer from a third-party purchaser to purchase the Stations from Seller in an amount approved by Buyer, within the time period specified in this Section 12(a), above, provided that Seller need not accept a bona fide offer if the consideration to be paid plus amounts paid by Buyer and credited toward the Purchase Price does not equal at least Twenty Million Dollars ($20,000,000). (b) In the event that ownership of the Licenses reverts to Seller subsequent to the Escrow Release Date as a result of a revocation of FCC consent to the transfer 5 of the Licenses, Buyer or its assigns shall operate the Stations pursuant to an LMA with substantially the terms and conditions of the LMA currently in effect between Buyer and Seller, provided, however, the LMA payment shall be equal to the total cost of Seller in the operation of the Stations. The LMA shall terminate upon the earlier to occur of the sale of the Stations or the end of the three years period contemplated by paragraph 4(a) above. 5. Buyer Representation and Warranty. Buyer represents and warrants to --------------------------------- Seller that subsequent to the Escrow Closing, it shall continue to operate the Stations and transmit the Station's signals exclusively from the present tower site at least until Buyer pays the Additional Amount in full. 6. Acknowledgement of Primary Lender. Buyer shall obtain a letter from --------------------------------- its primary lender, AMRESCO Commercial Finance, Inc., confirming its consent to the payment of the Additional Amount in accordance with the terms and conditions of this Agreement. 7. Tower Leases. Through the date upon which the Additional Amount is ------------ paid in full, Tower Lease income shall be the property of Seller and subsequent to the date upon which the Additional Amount is paid in full, Tower Lease income shall be the property of Buyer. 8. Assignment. The first sentence of Paragraph 26 of the Agreement is ---------- hereby amended by adding the following: "provided, however, such consent shall not be unreasonably withheld." 6 9. Counterparts. This Fourth Amendment may be signed in any number ------------ of counterparts with the same effect as if the signature to each counterpart was on the same instrument. 10. Effect. Except as modified by this Fourth Amendment, the ------ Original Agreement, the First Amendment, the Second Amendment and the Third Amendment, and all of the covenants, agreements, terms, provisions and conditions contained therein shall remain in full force and effect. The covenants, agreements, terms, provisions and conditions contained in this Fourth Amendment shall bind and inure to the benefit of the parties hereto and their respective successors, and, except as otherwise provided in the Original Agreement, the First Amendment, Second Amendment, and the Third Amendment, as modified in this Fourth Amendment, their respective assigns. 11. Contingent on LMA. The effectiveness of this Fourth Amendment is ----------------- contingent upon the execution of the amendment to the LMA attached as Exhibit C. 12. Transfer of Licenses. Notwithstanding anything to the contrary -------------------- contained herein, this Fourth Amendment shall not be construed to transfer the Licenses or control of the Stations from Seller to Buyer prior to the parties obtaining the consent of the FCC, and no Closing of the transactions contemplated by the parties hereto shall be deemed to have occurred before such FCC Consent has been obtained. 7 IN WITNESS WHEREOF, this Fourth Amendment has been duly executed by the parties hereto as of the date first above written. GREAT SCOTT BROADCASTING, LTD., a Pennsylvania Limited Partnership By: GREAT SCOTT COMMUNICATIONS, INC., a Pennsylvania Corporation, its General Partner By: /s/ Faye Scott --------------------- Faye Scott, President NASSAU BROADCASTING PARTNERS, L.P., a Delaware Limited Partnership By: Nassau Broadcasting Partners, Inc., a Delaware corporation, its General Partner By: /s/ Louis F. Mercatanti, Jr. ---------------------------- Louis F. Mercatanti, Jr. President With respect to Paragraph 3, only: EIZEN FINEBURG & McCARTHY, LLP, as Escrow Agent By: /s/ Bernard Eizen ----------------------- Bernard Eizen 8 EX-2.11 12 0012.txt ASSET PURCHASE AGMT DTD 8/7/1998 Exhibit 2.11 ASSET PURCHASE AGREEMENT THIS AGREEMENT is made and entered into this 7th day of August, 1998, by and between Port Jervis Broadcasting Co., Inc., a New York corporation ("Seller") and Nassau Broadcasting Partners, L.P., a Delaware limited partnership ("Buyer"). STATEMENT OF FACTS 1. Seller is the licensee and operator of radio stations WTSX-FM and WDLC-AM licensed to Port Jervis, New York (the "Stations"). 2. Buyer and Seller are parties to a Time Brokerage Agreement dated as of August 1, 1998 ("TBA"), pursuant to which Buyer has provided an over-the-air program service on the Stations. 3. Buyer has exercised an Option, granted pursuant to an Option Agreement dated as of August __, 1998, to purchase all of the assets of the Stations (the "Option Agreement"). 4. Subject to the consent of the Federal Communications Commission ("FCC"), Buyer desires to acquire the Stations, and all of the assets, leases, contracts, agreements, licenses, and other property used or useful in the operation of the Stations, with certain exceptions as provided herein, and Seller desires to transfer such assets to Buyer. NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties intending to be legally bound hereby, agree as follows: 1. SALE AND TRANSFER OF ASSETS. At the Closing, Seller will sell, assign, transfer and deliver to Buyer the following: 1.1. ASSETS TO BE TRANSFERRED. Subject to the terms and conditions of this Agreement, on the Closing Date (as defined in Section 10.1), Seller shall sell, convey, assign, transfer and deliver to Buyer, and Buyer shall purchase and accept, all of the business, rights, properties and assets, real and personal, tangible and intangible, of every type and description owned by Seller and used or held for use in connection with the business and operations of the Stations, together with all rights and privileges associated with such assets and business of the Stations, except for Excluded Assets (as defined in Section 1.2) (collectively, the "Assets"). Without limiting the foregoing, the Assets shall include the following: 1.1(a) LICENSES AND AUTHORIZATIONS. Subject to prior FCC consent, all of the FCC authorizations issued to Seller with respect to the Stations and their auxiliaries, including without limitation, all rights in and to the call letters WTSX-FM and WDLC-AM, to the extent that they can be conveyed, and all of those FCC authorizations listed and described on SCHEDULE 1.1(a) attached hereto, and all applications therefor, together with any renewals, extensions or modifications thereof and additions thereto or applications filed between the date hereof and the Closing Date (collectively, the "Licenses"). All of Seller's interest in the Licenses will be assigned to Buyer as hereinafter provided; 1.1(b) TANGIBLE PERSONAL PROPERTY. All equipment, electrical devices, antennas, cables, vehicles, furniture, fixtures, towers, office materials and supplies, hardware, tools, spare parts, records, tapes, discs, carts and other tangible personal property of every kind and description owned by Seller and used or held for use (including those not in operating condition) in connection with the business and operations of the Stations on the Closing Date, including without limitation those listed and described on SCHEDULE 1.1(b) attached hereto or any replacements thereafter acquired prior to the Closing Date (except as may be consumed in the ordinary course of business) and including all rights under manufacturers' and vendors' warranties; 1.1(c) REAL PROPERTY. The real property owned and used in connection with the operation of Stations, listed on SCHEDULE 1.1(c), including all structures, buildings, towers, transmitters, antennas and other improvements thereon (the "Real Property"); 1.1(d) LEASED REAL PROPERTY. Any of the leases of real property with respect to real property leased by Seller and used or held for use in connection with the business and operations of the Stations on the Closing Date, described on SCHEDULE 1.1(d) (the "Leased Property"); 1.1(e) AGREEMENTS FOR SALE OF TIME; TRADE/BARTER AGREEMENTS. Those orders and agreements now existing for the sale of advertising time on the Stations, to the extent of the unexpired portion thereof, for cash as listed and described in SCHEDULE 1.1(e)-1; those orders, agreements and arrangements for the exchange of advertising time, to the extent of the unexpired portion thereof for consideration other than cash ("Trade Out Agreements"), as listed and described in SCHEDULE 1.1(e)-2; all Cash Agreements and all Trade Out Agreements entered into in the ordinary course of business between the date hereof and the Closing Date to the extent of the unexpired portion thereof; 1.1(f) OTHER CONTRACTS. All unexpired contracts, agreements, equipment leases, arrangements, commitments or understandings, written or oral ("Contracts") described in SCHEDULE 1.1(f) hereto; 1.1(g) INTANGIBLE RIGHTS. Any trademarks, trade names, service marks, franchises, patents, jingles, slogans, logotypes and other intangible rights, owned and used or held for use by Seller on the Closing Date in connection with the business and 2 operations of the Stations, including those listed and described on SCHEDULE 1.1(g) hereto to the extent that Seller has the right to use and assign them; 1.1(h) PROGRAMMING AND COPYRIGHTS. All programs and programming materials and elements, music libraries and software of whatever form or nature owned by Seller and used or held for use in connection with the business and operation of the Stations on the Closing Date, whether recorded on tape or any other media or intended for live performance, and whether completed or held in production and any related common law and statutory copyrights owned by Seller and used or held for use in connection with the business and operations of the Stations, or licensed or sublicensed to Seller in connection therewith, to the extent that Seller has the right to use and assign them; 1.1(i) FCC RECORDS. All FCC program logs and other records that relate to the operation of the Stations as are required to be maintained under the rules and regulations of the FCC, including, but not limited to, an up-to-date and complete local public file during the 36 months prior to the Closing Date; 1.1(j) FILES AND RECORDS. All original files and other records of Seller relating to the business and operations of the Stations owned and in the possession of Seller, including without limitation all available schematics, blueprints, engineering data, customer lists, reports, specifications, projections, statistics, promotional graphics, original art work, mats, plates, negatives and other advertising, marketing or related materials, and copies of all other technical and financial information concerning the Stations and the Assets during the 36 months prior to the Closing Date; and 1.1(k) GOODWILL. All of Seller's goodwill in, and going concern value of, the Stations. 1.1(l) ACCOUNTS RECEIVABLE. Seller's accounts receivable in respect to the Stations. 1.2 EXCLUDED ASSETS. There shall be excluded from the Assets, and retained by Seller, to the extent in existence on the Closing Date the following assets listed in SCHEDULE 1.2 (collectively, the "Excluded Assets"): 1.2(a) CASH AND INVESTMENTS. All cash on hand or in bank accounts, and any and all other cash equivalents, including without limitation, certificates of deposit, commercial paper, treasury bills, asset or money market accounts and all such similar accounts or investments, or notes or other entitlements evidencing loans receivable and any securities owned or held by Seller; 1.2(b) CERTAIN ASSETS. Pension, profit sharing and savings plan and trusts and any assets thereof; 3 1.2(c) CONSIDERATION. The consideration delivered by Buyer to Seller pursuant to this Agreement; 1.2(d) FILES AND RECORDS. The files and records referred to in the parenthetical in Section 1.1(j); 1.2(e) INSURANCE POLICIES. All right, title and interest under all insurance policies or contracts of insurance and all claims or rights to payment thereunder, including insurance refunds; 1.2(f) CHOSES IN ACTION. Any and all causes of action and claims of Seller arising out of or relating to transactions prior to the Closing Date, including, without limitation, claims for tax refunds; and 1.2(g) FM ANTENNA SITE. All of Sellers right title and interest in and to the FM Site as that term is defined in 1.3 below, except for the lease set forth in 1.3. 1.3 LEASE OF ANTENNA SITE. The FM antenna site, described in the attached SCHEDULE 1.3, (the "FM Site") is now owned by Seller. From the Closing Date, for a period of ten (10) years, Seller shall lease to Buyer the FM Site, for $1 per month. In the event that Seller constructs a new tower on the FM Site, the monthly rent shall be increased to $750 per month upon completion of such tower. Buyer shall have an option to renew the lease of the FM Site for an additional ten year period. 2. PURCHASE PRICE AND PAYMENT. The Buyer shall pay to Seller as consideration for all of the Assets to be sold and bought hereunder pursuant to Section 1, the amounts described as the Purchase Price in Section 3.1 of the Option Agreement, less any adjustments described in Section 3.2, including credit for the Option Payment, as that term is defined in the Option Agreement. 3. NO ASSUMPTION OF LIABILITIES. The leases described in Section 1.1(d), the orders and agreements described in Section 1.1(e), the liabilities incurred by Buyer pursuant to the TBA which have not been satisfied prior to the Closing Date, and the contracts, agreements, arrangements, commitments and understandings described in SCHEDULE 1.1(f) are herein referred to as the "Assumed Obligations" and are the only agreements, contracts, obligations or commitments of Seller, whether known or unknown, contingent or otherwise that are to be assumed by Buyer as of the Closing Date. Except for the Assumed Obligations, Seller shall be solely responsible, and there shall be no assumption of liability by Buyer, for any agreement, contract, obligation or commitment of Seller, whether known or unknown, contingent or otherwise, relating to either the Stations or any of the affairs of Seller including, but not limited to, any agreement, executed or executory, relating to the exchange of time on the Stations for goods, wares, services, promotions, merchandising or anything other than cash. With respect to the Assumed Obligations, it is specifically 4 understood that Buyer shall assume only those obligations of Seller thereunder accruing on or after the Closing Date. Buyer shall not be obligated to perform any contract, agreement, obligation or commitment of Seller, whether known or unknown, contingent or otherwise, not specifically assigned to and assumed by Buyer hereunder. 4. SELLER'S REPRESENTATIONS AND WARRANTIES. As used in this Section 4, references to Seller's knowledge shall mean Seller's knowledge after Seller has exercised due diligence in making inquiries of its personnel. Seller represents and warrants that the following statements as to Seller and the Assets and the Stations are correct as of the date hereof and will be correct at the Closing Date: 4.1 LICENSES, AUTHORIZATION AND COMPLIANCE THEREWITH. Seller owns and/or has all franchises, licenses, permits, consents, approvals or authorizations of any public or governmental agency materially necessary to the conduct by Seller of its business as now conducted, including, but not limited to, the Licenses described in SCHEDULE 1.1(a) hereto, without any material conflict with the rights of others, all of which are in full force and effect, except as set forth in SCHEDULE 1.1(a), subject to no lien, charge, encumbrance, or limitation. Without material exception, to the best of Seller's knowledge, Seller is in material compliance with all of its material obligations with respect thereto; and no event has occurred which permits, or after notice or lapse of time, or both, would permit, the revocation or termination of any of the foregoing or would materially adversely affect the rights of Seller thereunder. Except as may be provided in SCHEDULE 1.1(a), Seller has no knowledge of any applications or any material complaints or proceedings pending or to the best of Seller's knowledge threatened as of the date hereof before the FCC directly relating to the business or operation of the Stations other than proceedings which generally affect the broadcast industry. Further, on the Closing Date, except as set forth on Schedule 1.1(a), the Stations will, unless otherwise provided, be on the air operating at full licensed power (consistent with the FCC's Rules and Regulations, the Communications Act of 1934, as amended (the "Act"), and regulations promulgated thereunder) under their present licenses, not under any Special Temporary Authority, as defined by the FCC. All FCC requirements for such authority will have been met, and there will be no material uncorrected FCC violations. If notice of any such violation is received or if Seller hereinafter becomes aware of any such violation prior to Closing, Seller, at its own expense, shall eliminate and cause to be removed all such violations by the date of Closing. All returns, reports and statements required to be filed with the FCC or other governmental agency relating to the Stations have been or will be duly and timely filed, and all said reports, returns and statements are or will be complete and correct as filed. To Seller's best knowledge, the "Public Inspection File" of the Stations will be complete and in full compliance with Section 73.3526 of the FCC's Rules and Regulations on the Closing Date. 4.2 ASSETS. 5 4.2(a) RIGHTS, ETC. TO SELL. Seller is the owner of and will at the Closing Date have good title to the Assets, and will on the Closing Date have full legal right, power and authority to assign, transfer and sell the Assets to Buyer, free and clear of all claims, security interests, mortgages, pledges, liens and other encumbrances of every nature whatsoever, except as set forth on Schedule 4.2(a). No action is pending or, to the knowledge of Seller, threatened, which would contest the ownership of, or right to transfer, any of the Assets. The Assets will not at the Closing Date be subject to any contract, sale or other agreement, except as disclosed in writing to and expressly assumed or taken subject to by Buyer hereunder, and the delivery of the Assets to Buyer pursuant to the provisions of this Agreement will transfer good and valid title thereto, free and clear of all claims, security interests, mortgages, pledges, liens and other encumbrances of every nature whatsoever. 4.2(b) CONDITION OF TANGIBLE PERSONAL PROPERTY. The equipment described in SCHEDULE 1.1(b) hereto comprises all the equipment used or useful to operate the Stations as they are presently being operated and to the best of Seller's knowledge said equipment is in material compliance with the FCC's Rules and Regulations. From the date hereof until Closing, the Stations and equipment will be operated and maintained in accordance with good engineering practices and to the best of Seller's knowledge in compliance with all of the FCC's Rules and Regulations. Except as disclosed in SCHEDULE 1.1(b), there are no material defects in any of the structures, improvements, electronic equipment or other tangible personal assets of the Stations, all of which are in operating condition. All of the Stations' buildings, structures, transmitters, towers, antennas, guy wires, ground systems, radials and other improvements are on property that will be included within the boundaries of the Real Property and the Leased Property. 4.2(c) REAL PROPERTY. With respect to the Real Property: (i) Seller is not a "foreign person" as that term is used in the Internal Revenue Code Section 1445 ("IRC ss.1445"), and Seller agrees to furnish to Buyer, at or prior to Closing, an Affidavit of Non-Foreign Status or any other documentation required under IRC ss.1445 to evidence that Seller is not a "foreign person"; (ii) There are no leases, rental agreements or other agreements relating to the Real Property which are to remain in effect after Buyer takes title to the Real Property, and Seller will make no agreement relating to the Real Property with any person other than Buyer; (iii) Seller has not received any notice with respect to the Real Property of any threatened rezoning, annexation or modification to the general plan proceeding which proceeding is still pending. 4.3 CONTRACTS, LEASES, AGREEMENTS, ETC. To the best of Seller's knowledge, each of the contracts, agreements, easements, licenses and leases (collectively, 6 "Contracts") described in Sections 1.1(d), 1.1(e)-1, 1.1(e)-2 and 1.1(f) hereto is valid, binding and enforceable in accordance with its terms and Seller is not in any material respect in default thereunder. Except for Contracts marked with an asterisk on SCHEDULES 1.1(d), 1.1(e)-1, 1.1(e)-2 and 1.1(f) (the "Contract Schedules"), no consents are required to assign to Buyer Seller's interest in any such Contract. Each such Contract may be assumed by Buyer without any material adverse change, and is now, and on the Closing Date will be, in full force and effect. 4.4 EMPLOYEES AND AGREEMENTS RELATING TO EMPLOYMENT. 4.4(a) Attached hereto as SCHEDULE 4.4(a) is a listing of: (1) the names of all persons currently on the payroll of the Stations, together with the amount paid or payable to each such person for their services; (2) any bonus or other material compensation arrangements and personnel benefits or policies in effect, if any, for each employee; and (3) a complete copy of each such plan, benefit, and policy. 4.4(b) Except as set forth on SCHEDULE 4.4(b), Seller has made no representation to any of the Stations' employees concerning their employment, if any, by Buyer after the Closing Date. Any decision by Buyer to employ any of the employees of the Stations in the operation of the Stations on or after 12:01 a.m. on the Closing Date, other than those set forth on 4.4(b), shall be made in its sole discretion. 4.4(c) No labor union is currently certified, or otherwise recognized, as the collective bargaining representative for any of the Stations' employees. Seller has no actual knowledge of any labor strike, or other employee or labor controversy or dispute pending which would affect the operation of the Stations. 4.4(d) Seller is not, and on the Closing Date will not be, except as disclosed on SCHEDULE 4.4(d), a party to (a) any labor contract, (b) any vacation pay, severance pay or other benefit arrangement (including ERISA or similar plans) with its employees, or (c) any employment contract or agreement which is not terminable upon termination notice of thirty (30) days. 4.5 LITIGATION. There are no actions, judgments, suits, proceedings, investigations or inquiries pending or, to the knowledge of Seller, threatened against or affecting Seller or questioning the validity of any action taken or to be taken in connection with the implementation of the provisions of this Agreement, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, agency, court or instrumentality, domestic or foreign. Seller does not know or have reasonable grounds to know of any factors or circumstances which might be the basis of any action, suit or proceeding; and, to the best of Seller's knowledge, except as disclosed in SCHEDULE 4.5, Seller has complied with all applicable statutes and regulations of all governmental authorities and agencies having jurisdiction over Seller. 4.6 COMPLIANCE WITH LAW. 7 4.6(a) GENERALLY. Seller has complied and is in compliance in all material respects with all laws, rules, regulations, and orders of any governmental entity applicable to Seller and the Assets, including, without limitation, the Act and rules and regulations thereunder ("Applicable Laws"). Seller has not been charged with and is not under investigation for any violation of Applicable Laws, nor, to the knowledge of Seller, is there any basis for any such charge or investigation. 4.6(b) REAL ESTATE MATTERS. All of the Real Property and all structures, transmitters, towers, equipment and improvements located thereon conform in all material respects with all applicable laws and regulations, including, without limitation, environmental, building and zoning laws and regulations, and no notice or actual knowledge of any violation of zoning, building or other laws, statutes and ordinances and regulations relating to such real property has been received or is known and there is no proposed, pending or threatened condemnation proceeding or similar action affecting any such Real Property. 4.6(c) HAZARDOUS MATERIALS. Except as set forth on Schedule 4.6(c), to the best of Seller's knowledge, no hazardous or toxic materials (as hereinafter defined) exist in any structure located on, or exist on or under the surface of the Real Property. For purposes of this Agreement, "hazardous or toxic material" shall mean waste, substances, materials, smoke, gas, pollutants, contaminants, asbestos or asbestos related products, PCB's, petroleum, crude oil (or any fraction or distillate thereof) or particulate matter designated as hazardous, toxic or dangerous, or requiring special handling, treatment or storage whether or not designated hazardous, toxic or dangerous under any environmental laws. For purposes of this Agreement, "environmental law" shall be interpreted to mean the Comprehensive Environmental Response Compensation and Liability Act, any successor to such law, and/or any other applicable federal, state, or local environmental, health or safety law, rule or regulation concerning the treating, producing, handling, storing, releasing, spilling, leaking, pumping, pouring, emitting, or dumping of any waste, substance, materials, smoke, gas or particulate matter or imposing liability or standards in connection therewith. 4.7 EXISTENCE AND POWERS; NO CONFLICT. Seller is a corporation duly formed, validly existing and in good standing under the laws of the State of New York and has the power and authority to own or lease its properties and to carry on business as now being conducted, and has all requisite power and authority to enter into, deliver and perform this Agreement. The execution, delivery, and performance of this Agreement by Seller have been duly and validly authorized and no other action is required. Neither the execution and delivery of this Agreement by Seller, nor the compliance by Seller with the respective terms thereof: (i) will, to the best of Seller's knowledge, breach any Applicable Laws; (ii) will conflict with or result in a breach of or constitute a default (or an event which, with notice or lapse of time, or both, would become a default) under any of the terms, conditions or provisions of any judgment, order, arbitration, injunction, decree or ruling of any court or governmental authority to which Seller or any of the Assets is subject or of Seller's Certificate of Incorporation, by-laws or any agreement, commitment, arrangement, lease, insurance policy, or other instrument to which Seller is a party or by 8 which it is bound; (iii) will result in the creation of any lien, equitable lien, tax lien, mortgage, charge, security interest or other encumbrance upon any of the Assets; (iv) will give to any other person any interests or rights, including rights of termination or cancellation, in or with respect to any of the priorities, assets, agreements, contracts or business of Seller; (v) will result in the loss or adverse modifications of the Licenses or any other license, franchise, permit or other governmental authorization granted to or held by Seller; or (vi) require the consent of any person except as disclosed in this Agreement. 4.8 OPERATION OF STATIONS. 4.8(a) The Stations have been, and shall continue to be, operated (1) in material compliance with their Licenses and Applicable Laws, and (2) in a manner which will not expose human beings to any level of non-ionizing radiation higher than the levels recommended for human exposure in "Safety Levels With Respect to Human Exposure to Radio Frequency Electromagnetic Fields, 3 kHz to 300 GHz" (ANSI/IEEE C95.1-1992), adopted by the IEEE and by the American National Standards Institute, November 1992. 4.8(b) Seller shall give prompt written notice to Buyer if (i) the transmission of the regular broadcast programming of either of the Stations in the normal and usual manner is interrupted or discontinued other than as a result of weekly routine maintenance or public utility company activity; or (ii) either of the Stations is operated at less than ninety (90%) of its licensed operating power, in either event for a period in excess of (A) twenty-four (24) consecutive hours or (B) an aggregate of seventy-two (72) hours in any thirty (30) day period; or (iii) if either of the Stations operate at reduced power for ten (10) days, thereby requiring written notification to the FCC pursuant to Section 73.1560(d) of the FCC Rules; or (iv) the programming format of either of the Stations is materially changed. 4.9 INSURANCE. The insurance policies owned by Seller or of which Seller is a named beneficiary, set forth on SCHEDULE 4.9 attached hereto, are now and on the Closing Date will be fully in effect in accordance with their terms, with no default in the payment of premiums on any such policy and no ground for cancellation or avoidance of any thereof or for reduction of the coverage provided hereby. 4.10 ABSENCE OF INSOLVENCY. No insolvency proceedings of any character, including, without limitation, bankruptcy, receivership, reorganization, composition or arrangement with creditors, voluntary or involuntary, affecting the Seller or any of its respective assets or properties, are pending or, to the knowledge of Seller, threatened, and Seller has made no assignment for the benefit or creditors, nor taken any action with a view to, or which would constitute the basis for, the institution of any such insolvency proceedings. 4.11 INTANGIBLES. Seller owns and has the exclusive right to use all the patents, copyrights, service or trademarks and trade names, call letters, logos, slogans and other intangible property or rights ("Intangibles") presently used in conjunction with the operation of the Stations, together with any goodwill associated therewith. To the best of 9 Seller's knowledge, the Intangibles are subject to no pending or threatened challenge and none of the Intangibles is being infringed by the activities or operations of any third person and none is subject to any outstanding order, judgment, decree, stipulation or agreement restricting the use thereof. 4.12 FINANCIAL STATEMENTS. Seller has heretofore furnished Purchaser with copies of the financial information of Seller as set forth on the attached SCHEDULE 4.12 (the "Financial Statements"). Except as noted therein or on SCHEDULE 4.12, the Financial Statements are complete and correct in all material respects, were prepared in accordance with generally accepted accounting principles consistently applied throughout the periods indicated and present fairly the results of operating cash flows for said periods. 4.13 TAXES. As of the Closing Date, Seller shall have timely and duly filed with the appropriate governmental agencies all tax returns, declarations of estimated tax, and tax reports required to be filed by it, and all taxes and other assessments which Seller is required to pay, withhold or collect have been timely and duly paid, withheld and collected. There are no present disputes as to taxes of any nature payable by Seller with respect to the Stations, and it has not filed an IRS Form 872 ("Consent Fixing Period of Limitations Upon Assessment of Income Tax") or otherwise agreed to extend the time for assessment of any taxes against it for any year. Any additional taxes, interest, penalties, assessments and deficiencies that shall become due and payable with respect to any tax return or tax obligation of Seller shall be the sole responsibility of Seller. 4.14. ABSENCE OF CERTAIN CHANGES. Since July 1, 1998, there has not been (i) any material adverse change in the property of Seller or any material labor dispute, grievance or organizational effort affecting the Assets, taken as a whole; (ii) any physical damage, destruction or loss (not covered by insurance) materially and adversely affecting the Assets or business of Seller, taken as a whole; (iii) any sale, assignment, lease or other transfer or disposition of any of the assets or properties of Seller, except in the ordinary course of business and with adequate replacement property being acquired as necessary; or (iv) any waiver of any right resulting in a materially adverse affect on the Assets. 10 5. BUYER'S REPRESENTATIONS AND WARRANTIES. As used in this Section 5, references to Buyer's knowledge shall mean Buyer's knowledge after the Buyer has exercised due diligence in making inquiries of its personnel. Buyer represents and warrants that the following statements as to Buyer are correct as of the date hereof and will be correct at the Closing Date: 5.1 FCC QUALIFICATIONS. Buyer is qualified under the Act, and the rules, regulations and policies promulgated thereunder to obtain FCC approval of the Application, as that term is defined in Section 8 of this Agreement and serve as the licensee of the Stations. Buyer has no knowledge of any material reason, fact, allegation or claim not stated herein which may impair Buyer's qualifications and knows of no reason why the FCC would not approve said Application. Between the date hereof and the Closing, Buyer will take no action knowingly that would substantially delay FCC approval or make it not qualified. 5.2 EXISTENCE AND POWERS; NO CONFLICT. Buyer is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware and has the power and authority to own or lease its properties and to carry on business as now being conducted, and has all requisite power and authority to enter into, deliver and perform this Agreement. The execution, delivery, and performance of this Agreement by Buyer have been duly and validly authorized by Buyer's general partner, and no other action is required. Neither execution and delivery of this Agreement by Buyer, nor the compliance by Buyer with the respective terms hereof: (i) will, to Buyer's best knowledge, breach any Applicable Laws; (ii) will conflict with or result in a breach of or constitute a default (or an event which, with notice or lapse of time, or both, would become a default), under any of the terms, conditions or provisions of, any judgment order arbitration injunction, decree or ruling of any court or governmental authority to which buyer is subject, or any of Buyer's partnership agreement, or any contract, commitment, arrangement, or agreement to which Buyer is party or by which it may be bound; or (iii) require the consent of any person except as disclosed in this Agreement. 5.3 DISCLOSURE. No covenant, representation or warranty made by Buyer in this Agreement and no statement made in any certificate or document furnished or to be furnished by Buyer in connection with the transactions contemplated by this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary to make such representation, warranty or statement not misleading to Seller. 5.4 NO LITIGATION. There is no litigation, judgment or decree outstanding or other judicial or administrative proceeding pending or, to the best of Buyer's knowledge, threatened which might adversely affect Buyer's power, authority or ability to enter into this Agreement and to carry out the transactions contemplated herein. Buyer does not know or have reasonable grounds to know of any factors or circumstances which might be the basis for such litigation, proceeding or investigation. 11 6. AGREEMENT NOT TO COMPETE. 6.1 AGREEMENT NOT TO COMPETE. On or before the Closing Date, Seller and Robert I. Wein shall execute individually an Agreement Not To Compete in the form annexed hereto as EXHIBIT D pursuant to which they shall agree not to participate in the ownership, management, operational control of and not be connected with or have any interest in, any radio station licensed to any community within the counties of Sussex in the State of New Jersey, Orange in the State of New York and Pike in the Commonwealth of Pennsylvania for a period of three (3) years immediately following the Closing. The parties hereto agree that the duration and area of the Agreement Not To Compete are reasonable. In the event that any Court determines that the duration or area, or both of them are unreasonable, and the Agreement Not To Compete is to that extent unenforceable, the parties hereto agree that the Agreement Not To Compete shall remain in full force and effect for the greatest period of time and in the greatest area that would render it enforceable. Seller agrees that damages are an inadequate remedy for any breach of this covenant and that Buyer shall, whether or not it is pursuing any potential remedies at law, be entitled to equitable relief, in the form of temporary, preliminary and permanent injunctions, without bond or security, without any actual or threatened breach of this Agreement Not To Compete. By executing this Agreement in the space provided below, Seller and Robert I. Wein each agree to execute such Agreement Not To Compete and deliver such Agreement Not To Compete to Buyer at Closing. Port Jervis Broadcasting Co., Inc. By: ------------------------------- --------------------------- Robert I. Wein, President Robert I. Wein 7. CONDUCT PRIOR TO CLOSING. 7.1 ACCESS AND INFORMATION. Seller shall give Buyer and its representatives reasonable access throughout the period prior to Closing to the operations, properties, books, contracts, agreements, leases, commitments and records of the Stations at reasonable times, provided that the normal operations of Seller's business shall not be disrupted. 7.2 CONDUCT OF STATION BUSINESS. Between the date hereof and Closing: 7.2(a) Seller shall produce the consent of any third parties necessary for the assignment to Buyer of any contract, lease or agreement marked with an asterisk and listed on the CONTRACT SCHEDULES; 12 7.2(b) Seller shall (i) conduct the business of the Stations in a prudent and responsible manner in good faith and operate and maintain the Stations and the Assets in accordance with good engineering and Seller's past practices and in compliance with the terms of the Licenses and Applicable Laws; and (ii) keep all of the Assets to be transferred hereunder in substantially the same operating condition and repair as of the date hereof, reasonable wear and tear excepted; 7.2(c) Except as set forth in SCHEDULE 7.2(c), Seller shall not (i) hire additional personnel or unreasonably increase the compensation or bonuses payable or to become payable to any of the Stations' employees; (ii) enter into an agreement to sell, assign, lease, exchange or otherwise transfer or dispose of any of the Assets; (iii) enter into any new contract or renegotiate, modify, amend, renew, or terminate any existing contract, except that Seller may, in the ordinary and usual course of business, enter into: (1) agreements for the sale of time on the Stations for such rates and on such terms as are consistent with Seller's normal and usual practices; (2) any contract(s) terminable on thirty (30) days notice or less without premium or penalty; and (3) any contract(s) consented to by Buyer in writing; (iv) change the Stations' call letters, or change the Stations' facilities, or apply for any construction permit(s) with the FCC, without Buyer's consent, which will not be unreasonably withheld or delayed, or make any material adverse changes in the Stations' leasehold improvements and other improvements and fixtures; or (v) except as required by law or any governmental agency, disclose any information relating to the Stations to any third party, other than to Seller's authorized employees, agents and professional advisors in the ordinary course of business and other than to Buyer and Buyer's authorized representatives as provided for herein; 7.2(d) Seller shall maintain in full force and effect the insurance described in SCHEDULE 4.9; and 7.2(e) Seller shall give Buyer notice of any unusual operating problems or developments affecting Seller between the date hereof and the Closing Date, including, but not limited to, any problem or development which would materially adversely affect the Assets, and keep Buyer fully apprised of all matters having material financial impact on Seller. 7.3 BUYER'S INSPECTIONS AND APPROVALS. 7.3(a) ENGINEERING INSPECTION. It is agreed that within ten (10) days prior to the Closing Date, Buyer's engineer may inspect the Assets to insure that its equipment complies with all warranties and conditions set forth herein. Seller agrees to extend full cooperation to said engineer, including such access to the equipment and to logs pertaining thereto at such time or times as said engineer shall reasonably request. Buyer shall furnish Seller with a copy of the report of any inspection prior to the Closing Date. If Buyer's engineer reports that the equipment fails to materially comply with said warranties, Buyer may either: 13 (1) Elect to consummate the purchase of the Assets in which case Seller shall bear the cost of equipment repair in an amount not to exceed $50,000, and such amount shall be deducted from the Purchase Price; or (2) Elect to consummate the purchase of the Assets exclusive of the equipment which fails to materially comply with warranties, in which case the Purchase Price shall be reduced by the fair market value of such equipment. 7.3(b) INSPECTION OF REAL ESTATE. Seller agrees to convey and Buyer agrees to accept such title to the Real Property as the title company shall be willing to insure on its standard form and at standard rates, such title to be subject to: (i) all standard exclusions and printed exceptions in the standard form of owner's policy of title insurance; (ii) encroachments and all other matters that would be disclosed by a current and accurate survey of the Real Property; (iii) liens for taxes and assessments not yet due and payable; (iv) easements for public utilities affecting the Real Property; (v) all easements, covenants, restrictions and rights-of-way affecting the Real Property; (vi) the exceptions listed on SCHEDULE 7.3; and (vii) both (a) any applicable zoning ordinances, other land use laws and regulations; and (b) those matters, if any, which are waived by Buyer pursuant to this Section (the foregoing title matters are hereinafter referred to as "Permitted Title Exceptions"). Within thirty (30) days of the execution of this Agreement, Buyer shall order, at Buyer's sole cost and expense, a title commitment from a title insurance company authorized to do business in the State of New York (the "Commitment"). If the Commitment reveals a defect in title which is not one of the Permitted Title Exceptions, Buyer may either waive such defect or give prompt (within ten (10) days of receipt of such commitment or endorsement, time being of the essence) written notice to Seller of such defect in title whereupon Seller may, at its option, attempt to cure such defect prior to the Closing or decline to cure such defect. Nothing contained herein shall be deemed or construed to require Seller to incur any costs and expenses, or to bring any action or proceeding, to remove any defect in title. Notwithstanding the foregoing, Seller shall have the right, at its sole option, to extend the Closing Date by not more than sixty (60) days to attempt to cure any defect in title objected to by Buyer in accordance with this Section 7. Seller shall give Buyer no less than five (5) business days' notice of a new Closing Date. 7.3(c) ENVIRONMENTAL AUDIT. Buyer shall promptly, at its expense, arrange for such environmental investigations and audits (the "Audit") of the Real Property as it deems appropriate including, without limitation: (i) conditions with respect to or contamination or pollution of surface or groundwaters, soil and air, (ii) the disposal, presence, release or threat of release of hazardous or toxic material thereon, and (iii) compliance with environmental laws or other Applicable Laws. Buyer shall furnish Seller with a copy of the report of the Audit within five (5) business days after Buyer's receipt thereof. If the Audit discloses a condition which materially contradicts the representations in Section 5.6(c), Buyer may either: 14 (i) Elect to consummate the purchase of the Assets in which case Seller shall bear the cost of remediating such condition in an amount not to exceed $100,000, and such amount shall be deducted from the Purchase Price; or (ii) Elect to consummate the purchase of the Assets exclusive of the portion of the Real Property on which the condition exists (and exclusive of the lease in the event such Real Property is leased by Seller), in which case the Purchase Price shall be reduced by the fair market value of such Real Property without reference to such condition. 7.4 RISK OF LOSS. The risk of any loss, damage or destruction to any of the Assets from fire or other casualty or cause shall be borne by the Seller at all times prior to 12:01 a.m. on the Closing Date. Upon the occurrence of any loss or damage to any material portion of the Assets as a result of fire, casualty or other cause prior to Closing, Seller shall notify Buyer of same in writing immediately, stating with particularity the extent of such loss or damage incurred, the cause thereof if known, and the extent to which restoration, replacement and repair of the Assets lost or destroyed will be reimbursed under any insurance policy with respect thereto. Subject to the provisions hereof, Buyer shall have the option (but not the obligation), in the event the loss or damage exceeds One Hundred Thousand Dollars ($100,000.00) and the property cannot be substantially repaired or restored within thirty (30) days, exercisable within ten (10) days after receipt of such notice from Seller to: (i) postpone the Closing until such time as the property has been completely repaired, replaced or restored, unless the same cannot be reasonably effected within two (2) months of notification; (ii) elect to consummate the Closing and accept the property in its "then" condition, in which event Seller shall at the Closing assign all rights under any insurance claim covering the loss and pay over any proceeds under any such insurance policy theretofore received by Seller with respect thereto; or (iii) rescind this Agreement at no cost or expense to Buyer and declare the Agreement of no further binding force and effect, if such repairs, replacements or restorations are not completed within ninety (90) days after the date specified herein as the Closing Date, provided that such repairs, replacements or restorations are necessary to the normal operation of the Stations. In the event Buyer elects to postpone the Closing Date as provided in clause (i) of this Subsection, the parties hereto will cooperate to extend the time during which this Agreement must be closed as specified in the consent of the FCC referred to herein. 7.5 CONFIDENTIALITY. Between the date of this Agreement and the Closing Date, Buyer will maintain strict confidentiality with respect to all documents and information furnished by or on behalf of Seller (except for documents of information required to be disclosed by law), and, if this Agreement is terminated, Buyer shall return to Seller all such documents and information. Notwithstanding the foregoing, Buyer may make disclosure that may be required: (i) by its lenders; (ii) in the preparation of federal, state and local tax returns; (iii) pursuant to any federal or state securities laws; or (iv) as may be necessary to advise any of Buyer's investors or advisors; provided, that, in such case, Buyer shall advise the investors of the confidentiality of the information. 15 7.6 PROHIBITED ACTION. Between the date of this Agreement and the Closing Date, neither Buyer nor Seller will commit any act or omission that would: (i) disqualify them as parties to an assignment of the Licenses or, as to Buyer, as owner or operator of the Stations and the Assets; (ii) jeopardize the validity of the Licenses or (iii) interfere with the existing relationships between the Stations and their advertisers, suppliers and others. 8. APPLICATION FOR FCC APPROVAL. 8.1 FILING AND PROSECUTION OF APPLICATION. As promptly as practicable after the execution of this Agreement, and in no event later than ten (10) business days thereafter, Buyer and Seller shall join in an application to the FCC requesting the FCC's written consent to the assignment of the Licenses of the Stations to Buyer and to the consummation of the transactions contemplated by this Agreement (the "Application"). Both parties shall promptly respond to any requests for the submission of additional information and shall vigorously oppose any protests, petition to deny, petition for reconsideration or appeal of the FCC's consent and approval that may be filed. Buyer and Seller shall proceed with due diligence and promptly take all steps necessary to the expeditious prosecution of such application to a favorable conclusion, using their best efforts throughout. 8.2 EXPENSES. Each party shall bear its own expenses in connection with the preparation of the applicable sections of the Application and in connection with the prosecution of such application. Seller and Buyer will divide and pay equally the filing and grant fees, if any, charged by the FCC. 8.3 DESIGNATION FOR HEARING. If, for any reason, the Application is designated for hearing by the FCC or if the parties are notified by the FCC in writing of its intention to designate the Application for hearing, either party, if not then in default, shall have the right by written notice within fifteen (15) days of such designation for hearing, to terminate this Agreement. 8.4 CONTROL OF STATIONS. This Agreement shall not be consummated until the FCC has given its written consent to the assignment of the Licenses of the Stations. 8.5 BEST EFFORTS. Each party hereto agrees to use its best efforts in the performance and fulfillment of all terms and conditions of this transaction applicable to such party and in filing an application for the FCC's consent, and agrees to execute such other and further documents as may be reasonably required to carry out the intent of this Agreement. 9. BULK SALES LAW. 16 Buyer hereby waives compliance by seller with the provisions of all Bulk Sales Laws, or other similar provisions, provided, however that Seller agrees to indemnify and hold Buyer harmless for any claims arising thereunder. 10. CLOSING. Subject to the terms and conditions herein stated, the parties agree as follows: 10.1 CLOSING DATE. The Closing of the transactions contemplated herein shall be held on a date in time, as specified by Buyer in writing to Seller that is no less than five (5) and no more than ten calendar (10) days after the date upon which the approval of the FCC required for the consummation of the transactions contemplated herein shall become a "Final Order"; provided, however, "Final Order" means the date on which the consent of the FCC is no longer subject to administrative or judicial reconsideration, review, appeal or stay. The parties hereby agree and stipulate that, absent the pendency of any petition, application or motion seeking reconsideration, review, appeal or stay of the Consent, and absent any FCC action reconsidering, reviewing, staying or modifying the Consent, such Consent shall be treated as final as of 12:01 A.M. on the forty-first day after the date of public notice issued by the FCC approving the assignment of the Licenses to Buyer. The Closing shall take place at the offices of Sterns & Weinroth, A Professional Corporation, at 9:00 A.M. local time, or such other time or place as mutually agreed. 10.2 SELLER'S OBLIGATIONS AT CLOSING. At the Closing, Seller shall execute and deliver or cause to be delivered to Buyer the following, in a form and substance reasonably approved by counsel for Buyer: 10.2(a) A Bill of Sale for all tangible personal property to be transferred hereunder, pursuant to Section 1.1(b), containing a warranty of title and covenant against all liens, encumbrances and restrictions of any kind whatsoever, in substantially the form attached hereto as EXHIBIT B; 10.2(b) One or more assignments assigning to Buyer the Licenses and intangible property to be acquired by Buyer hereunder, in substantially the form attached hereto as EXHIBIT C; 10.2(c) One or more assignments assigning to Buyer the Contracts to be assigned to Buyer hereunder, in substantially the form attached hereto as EXHIBIT D, together with all necessary consents thereto and the original copies of said Contracts; 10.2(d) A certificate from Seller stating that: (i) all representations and warranties of Seller as set forth in this Agreement or in any statement, certificate, schedule, exhibit or other document delivered pursuant to this Agreement by Seller are true and correct in all material respects, as of the Closing Date; and (ii) Seller has, in all material respects, performed and complied with all covenants, agreements and 17 conditions required by this Agreement to be performed or complied with by Seller at or prior to the Closing Date; 10.2(e) A deed transferring title to the Real Property to Buyer; 10.2(f) A lease for the FM Site in substantially the form attached hereto as EXHIBIT E; 10.2(g) An opinion of counsel for Seller in the form attached hereto as EXHIBIT F; 10.2(h) An opinion of Seller's FCC Counsel in the form attached hereto as EXHIBIT G; 10.2(i) Copies of the files, records and logs referred to in Sections 1.1(i) and 1.1(j) hereof and copies of all of the Licenses; and 10.2(j) Such other documents or instruments as counsel for Buyer may reasonably request and in a form reasonably acceptable to Buyer's counsel, which documents are necessary to carry into effect the provisions of this Agreement. 10.3 BUYER'S OBLIGATIONS AT CLOSING. At the Closing, Buyer shall execute and deliver or cause to be delivered to Seller the following in a form and substance reasonably acceptable to Seller's counsel: 10.3(a) The Purchase Price as set forth in Section 2; 10.3(b) One or more assumptions assuming the Contracts being assigned by Seller; 10.3(c) A certificate from Buyer stating that: (i) all representations and warranties of Buyer as set forth in this Agreement or any statement, certificate, or other document delivered pursuant to this Agreement by Seller are true and correct in all material respects as of the Closing Date; and (ii) Seller has, in all material respects, performed and complied with all covenants, agreements, and conditions required by this Agreement to be performed or complied with by Seller at or prior to the Closing Date; and 10.3(d) Such other documents or instruments as counsel for Seller may reasonably request and in a form acceptable to Seller's counsel, which documents are necessary to carry into effect the provisions of this Agreement. 10.4 CONDITION TO OBLIGATIONS OF BUYER. The obligation of Buyer to consummate the purchase of the Assets at the Closing shall be subject to the performance, in all material respects, on or prior to the Closing Date, of all of the covenants and agreements as set forth elsewhere in this Agreement to be performed by Seller, and upon the following additional conditions: 18 10.4(a) The representations and warranties of Seller shall be true in all material respects as of the Closing Date; 10.4(b) There shall not have occurred any material adverse change in the condition of the Assets; 10.4(c) The consents required from all governmental agencies (including, without limitation, the Final Order of the FCC) to Buyer's acquisition of the Assets shall have been granted, without any condition materially adverse to Buyer, and such consents shall be valid and outstanding on the Closing Date; 10.4(d) No action or proceeding shall be pending or threatened, challenging the validity of this Agreement or seeking to delay the consummation of any of the transactions for which this Agreement provides, which in the reasonable opinion of Buyer is material to the transactions contemplated by this Agreement; 10.4(e) Seller shall have obtained and delivered to Buyer the written consents of all requisite parties to assign and transfer to Buyer those Contracts material to the operation of the Stations without conditions materially adverse to Buyer; 10.4(f) Seller shall have in all material respects performed and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by it prior to and on the Closing Date; 10.4(g) All of the requirements of Section 10.2 shall have been met; and 10.4(h) Seller shall deliver, in form and substance satisfactory to Buyer, an acknowledgment that Seller has retained no right or reversion of the Licenses, has no right to the reassignment of the Licenses in the future and has not reserved the right to use the facilities of the Stations in the future for any reason whatsoever. 10.4(i) Seller shall agree to the allocation of the Purchase Price among the Assets pursuant to Section 12 of this Agreement, which agreement Seller shall not unreasonably withhold. Buyer shall have the right to waive any or all of the foregoing conditions of Closing at its sole option and risk. 10.5 CONDITION TO OBLIGATIONS OF SELLER. The obligation of Seller to consummate the purchase of the Assets at the Closing shall be subject to the performance, in all material respects, on or prior to the Closing Date, of all of the covenants and agreements as set forth elsewhere in this Agreement to be performed by Seller, and upon the following additional conditions: 19 10.5(a) The representations and warranties of Buyer shall be true in all material respects as of the Closing Date; 10.5(b) The consents required from all governmental agencies (including, without limitation, the Final Order of the FCC) to Buyer's acquisition of the Assets shall have been granted, without any condition materially adverse to Seller, and such consents shall be valid and outstanding on the Closing Date; 10.5(c) Buyer shall have in all material respects performed and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by it prior to and on the Closing Date; and 10.5(d) All of the requirements of Section 10.3 shall have been met. 10.5(e) Buyer shall agree to the allocation of the Purchase Price among the Assets pursuant to Section 12 of this Agreement, which agreement Buyer shall not unreasonably withhold. Seller shall have the right to waive any or all of the foregoing conditions of Closing at its sole option and risk. 10.6 FURTHER ASSURANCE. From time to time, upon request and without further consideration on or after the Closing Date, Seller and Buyer will execute and deliver such other instruments of conveyance and transfer and take such other action as may be reasonably required more effectively to convey, transfer to and vest in the Buyer, and to put the Buyer in possession and operating control of, any part of the Assets, and, in the case of contracts and rights, if any, which cannot be transferred effectively without the consent of third parties which is unobtainable, to use good faith efforts to secure to the Buyer the benefits thereof. 11. OTHER CLOSING OBLIGATIONS. 11.1 PRORATIONS. Except for the income and obligations which are the subject of the TBA, Seller shall be entitled to all income earned or accrued and shall be responsible for all liabilities and obligations incurred or payable in connection with the operation of the Stations through the close of business on the day preceding the Closing Date. Buyer shall be entitled to all income earned or accrued and shall be responsible for all liabilities and obligations incurred or payable in connection with the operation of the Stations after the close of business on the day preceding the Closing Date. All overlapping items of income or expense for which Buyer is not entitled to receive or responsible to pay under the TBA shall be apportioned between Seller and Buyer as of the close of business on the day preceding the Closing Date, in accordance with generally accepted accounting principles with the understanding that Buyer shall only have responsibility for the Assumed Obligations. Items to be apportioned include, but are not limited to, the following: 20 11.1(a) Prepaid expenses arising from payments made for goods or services prior to the Closing Date if all or part of the goods or services have not been received or used prior to the Closing Date (for example, rents paid in advance for a rental period extending beyond the Closing Date); 11.1(b) Liabilities, customarily accrued, arising from expenses incurred but unpaid as of the close of business on the day preceding the Closing Date (for example, frequency discounts; rent; and sales commissions); and 11.1(c) Personal property taxes and utility charges relating to the Stations. Within thirty (30) days after the Closing, Buyer shall deliver to Seller a statement setting forth in reasonable detail the basis for prorations pursuant to this Section, and Buyer shall pay to Seller, or Seller shall pay to Buyer, as the case may be, any net amount due as the result of the proration statement (or, if there is a dispute, the undisputed amount thereof). If Seller disputes Buyer's determinations, or, if at any time after delivery of Buyer's statement of determinations any party determines that any item included in the proration is inaccurate or that an additional item should be included in the prorations, the parties shall confer with regard to the matter and an appropriate adjustment and payment shall be made as agreed upon by them or, if they are unable to resolve the matter, by a firm of independent certified public accountants mutually agreeable to the parties, whose decision on the matter shall be binding and whose fees and expenses shall be borne equally by them. 11.2 FEES; SALES AND TRANSFER TAXES. All filing and recording fees in connection with any instrument of conveyance or transfer delivered pursuant to this Agreement shall be paid by Buyer. All sales and other transfer taxes, if any, in respect of the Assets sold and transferred hereunder shall be paid by Seller. 11.3 OTHER TAXES. Any and all sales taxes, unemployment insurance and social security taxes, and all other taxes due any state, federal or local government by Seller on or before the Closing Date shall be paid by Seller on, or prior to, such time. 11.4 EMPLOYEES. On the Closing Date, Seller shall notify all persons employed by Seller in connection with the business of the change of the ownership of the business and shall pay all wages and bonuses owing to such employees (and all vacation, severance pay and fringe benefits to which such employees are entitled) such that any employee of Seller whom Buyer may elect to retain in Buyer's employ shall have no claim against Buyer by reason of any prior employment in Seller's business during Seller's ownership thereof. 12. ALLOCATION OF PURCHASE PRICE. 21 The Purchase Price shall be allocated among the Assets pursuant to the mutual agreement of the Buyer and Seller prior to the Closing Date. Each of the parties hereto agrees to prepare and file its tax returns reflecting the allocations in a manner consistent with this Agreement. 13. INDEMNIFICATION. 13.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All covenants and agreements pertaining to matters to be performed after Closing and all representations and warranties contained in this Agreement shall survive for a period not to exceed two (2) years after the Closing Date ("Survival Period"), except that the representations and warranties which the party making the same knew or would have, through the exercise of reasonable diligence, known to be false shall continue indefinitely. No claim which is the subject of the Survival Period may be brought under this Agreement or with respect to the transactions described herein 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 Survival Period. In the event such notice is so given, the right to indemnification with respect thereto under this Section 13 shall survive the Survival Period until such claim is finally resolved and any obligations with respect thereto are fully satisfied. 13.2 INDEMNITY BY SELLER. Seller agrees to pay and discharge and to save and protect Buyer and its officers, directors, shareholders and affiliates free and harmless from all obligations, claims and demands (including reasonable attorneys' fees incurred by Buyer with respect thereto) (collectively "Seller's Obligations") against, arising out of or in connection with (a) any lease, contract or other agreement of Seller not assumed by Buyer pursuant to this Agreement; (b) the ownership of the Stations or the Assets that shall arise or accrue prior to the Closing which was not incurred by Buyer under the TBA; and (c) any material breach or violation by Seller of any covenant, agreement or warranty herein contained, or the inaccuracy of any representation of Seller made in this Agreement. 13.3 INDEMNITY BY BUYER. Buyer agrees to pay and discharge and to save and protect Seller and its officers, directors, shareholders and affiliates free and harmless from all obligations, claims, and demands (including but not limited to attorney fees incurred by Seller with respect thereto) against, arising out of or in connection with (a) any lease, contract, or other agreement of Seller to be assumed by Buyer pursuant to this Agreement; (b) that shall arise or accrue against or in connection with the ownership or operation of the Stations and the Assets from and after the Closing; and (c) any material breach or violation by Buyer of any covenant, agreement or warranty herein contained or the inaccuracy of any representation of Buyer made in this Agreement. 13.4 INDEMNIFICATION PROCEDURE; RIGHT OF OFFSET. In the event that any party hereto asserts a claim for indemnification hereunder, such party seeking indemnification shall give written notice to the indemnifying party specifying the nature and the amount, if known, of the claim asserted. The indemnifying party shall then have the right, using counsel reasonably satisfactory to the party seeking indemnification, to investigate, 22 secure, contest or settle the claim alleged by such third party (hereinafter called a "contest"), provided that the party seeking indemnification may participate voluntarily, at its own expense, in any such contest through representatives and counsel of its own choice, and, provided further, that any such action by the indemnifying party relating to the contest shall be without prejudice to the party seeking indemnification. Except as provided otherwise in Section 13.4, the indemnifying party shall bear all costs of such contests and shall indemnify and hold the party seeking indemnification harmless against and from all costs, fees, and expenses of such contest. Unless and until the indemnifying party elects to prosecute the contest, the party seeking indemnification shall have the full right, at its option, to do so and to look to the indemnifying party under the provisions of this Agreement for the amount of the costs, if any, of prosecuting the contest. The failure of the indemnifying party to respond in writing to the aforesaid notice of the party seeking indemnification with respect to such contest within twenty (20) days after the receipt thereof shall be deemed an election not to prosecute the same. If the indemnifying party fails to prosecute the contest and the party seeking indemnification does not prosecute the contest or does so and the decision is rendered against it, the amount paid by the party seeking indemnification to the third party in settlement or satisfaction of the contest shall be deemed a valid claim hereunder. In the event that the contest involves any Seller's obligations, Buyer shall have the right to offset the amount of the costs, if any, incurred by Buyer in prosecuting the contest together with any sums owed in connection with the resolution or settlement thereof against amounts which may be owed by Buyer to Seller. The parties hereto shall make mutually available to each other all relevant information in their possession relating to any such contest and shall cooperate in the defense thereof. 14. TERMINATION BEFORE CLOSING; DEFAULT AND REMEDIES. 14.1 TERMINATION BEFORE CLOSING. If Closing shall not have previously occurred, this Agreement may be terminated: 14.1(a) Pursuant to Section 7.3 hereof; 14.1(b) By Buyer, upon the occurrence of a Seller's Event of Default (as defined in Section 14.2) or upon failure of a condition precedent to Buyer's obligation to close set forth in Section 10.4; 14.1(d) By Seller, upon the occurrence of a Buyer's Event of Default (as defined in Section 14.2) or upon failure of a condition precedent to Seller's obligation to close set forth in Section 10.5; 14.1(e) By Seller upon the failure of any of the conditions set forth in Section 10.5(b) hereof; or 23 14.2 DEFAULT AND REMEDIES. 14.2(a) The occurrence of any one or more of the following events shall constitute a material default of this Agreement by Buyer ("Buyer's Event of Default"): (i) The material breach of any representation or warranty by Buyer hereunder unless such breach is cured prior to the Closing Date; (ii) The failure by Buyer to consummate the transactions contemplated by this Agreement in violation of the provisions of this Agreement; (iii) The failure by Buyer to perform any other of its obligations under this Agreement, where such failure shall continue for a period of ten (10) days after delivery of written notice of demand therefor from Seller to Buyer; provided, however, that if more than ten (10) days are reasonably required to cure such failure, then Buyer shall not be deemed to be in default thereof if Buyer, in good faith, has commenced such cure within said ten (10) day period and thereafter diligently prosecutes such cure to completion and completes such cure prior to Closing. 14.2(b) The occurrence of any one or more of the following events shall constitute a material default of this Agreement by Seller ("Seller's Event of Default"): (i) The material breach of any representation or warranty by Seller hereunder unless such breach is cured prior to the Closing Date; (ii) The failure by Seller to consummate the transactions contemplated by this Agreement in violation of the terms of this Agreement; (iii) The failure by Seller to perform any other of its obligations under this Agreement, where such failure shall continue for a period of ten (10) days after delivery of written notice of demand therefor from Buyer to Seller; provided, however, that if more than ten (10) days are reasonably required to cure such failure, then Seller shall not be deemed to be in default thereof if Seller, in good faith, has commenced such cure within said ten (10) day period and thereafter diligently prosecutes such cure to completion and completes such cure prior to Closing. 14.2(c) Seller acknowledges that the Station is of a special, unique, and extraordinary character, and that any breach of this Agreement by Seller could not be compensated for by damages. Accordingly, upon the occurrence of a Seller's Event of Default, Buyer shall be entitled, in addition to any other remedies that it may have, to enforcement of this Agreement (subject to obtaining any required approval of the FCC) by a decree of specific performance or injunctive relief requiring Seller to fulfill its obligations under this Agreement. In any action to specifically enforce Seller's obligation to close the transaction contemplated by this Agreement, Seller shall waive the defense that there is an adequate remedy at law or in equity and agrees that Buyer shall be entitled to obtain specific performance of Seller's obligation to close hereunder without being required to 24 prove actual damages. As a condition to seeking specific performance, Buyer shall not be required to tender the Purchase Price but shall be required to demonstrate that Buyer is ready, willing and able to tender the Purchase Price and consummate the purchase of the Station as contemplated hereunder. 14.2(d) Upon the occurrence of a Buyer's Event of Default, Seller shall have only the rights set forth in Section 14.1. 15. ACCESS TO BOOKS AND RECORDS. After the Closing Date, Buyer and Seller shall each allow the other reasonable access during normal business hours upon reasonable prior notice to their respective books and records pertaining to the operation of the Stations prior to the Closing Date and shall retain such records for a period of not less than three (3) years after the Closing Date. 16. NOTICES. All notices and other communications hereunder shall be in writing and be deemed to have been duly given if delivered personally or by overnight courier or sent by telecopy or mailed by registered mail, postage prepaid, addressed as follows: (a) If to Seller, to: WTSX, Inc. P.O. Box 290 Port Jervis, NY 12771 ATTENTION: Robert I. Wein 25 with a copy to: Cuddeback & Onofry 17 East Main Street P.O. Box 1114 Port Jervis, NY 12771 ATTENTION: Robert A. Onofry, Esq. (b) If to Buyer, to: Louis F. Mercatanti, Jr. Nassau Broadcasting Partners, L.P. 600 Alexander Road Princeton, NJ 08540 with a copy to: Mark D. Schorr, Esq. Sterns & Weinroth. P.C. 50 West State Street, Suite 1400 P.O. Box 1298 Trenton, NJ 08607-1298 or such other address with respect to any party hereto as such party may from time to time notify (as provided above) to the other party hereto. Any such notice, demand or communication shall be deemed to have been given (i) if so mailed, as of the close of the third business day following the date so mailed, and (ii) if personally delivered or otherwise sent as provided above, on the date delivered or sent if sent by telecopy and on the next business day after the date sent in all other cases. 17. CONTROL OF STATION. Between the date hereof and the Closing Date, Seller shall manage and control the operation of the Station subject only to the terms and conditions of the TBA. 18. EXPENSES. Unless otherwise agreed to in writing by the parties hereto, each party shall pay its own costs and expenses, including any and all legal and accounting fees, of its performance and compliance with all conditions and agreements contained herein on its or their part to be performed or complied with. 26 19. DISCLOSURE OF EXHIBITS AND SCHEDULES. Notwithstanding anything to the contrary contained in this Agreement or in any of the Exhibits and Schedules, any information disclosed in one Exhibit or Schedule, as the case may be, shall be deemed to be disclosed in all Exhibits and Schedules. Certain information set forth in the Exhibits and Schedules, as the case may be, is included solely for informational purposes and may not be required to be disclosed pursuant to this Agreement. The disclosure of any information shall not be deemed to constitute an acknowledgment that such information is required to be disclosed in connection with the representations and warranties made by Seller in this Agreement or is material, nor shall such information be deemed to establish a standard of materiality. Except as expressly set forth in this Agreement, there are no representations or warranties, express or implied, being made by Seller. 20. SECTION HEADINGS. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 21. ENTIRE AGREEMENT; FILINGS. This Agreement and all Schedules and Exhibits attached hereto constitute the entire agreement of the parties with respect to the subject matter hereof and supersede all prior understandings and agreements among the parties, whether oral or written, contain the entire understanding of the parties and shall not be changed, modified, amended, extended, terminated, waived or discharged except by subsequent instrument in writing signed by the parties hereto. To the extent permitted by the FCC, the Schedules shall not be filed with the FCC or otherwise disclosed or made public. 22. COUNTERPARTS. This Agreement may be signed upon any number of counterparts with the same effect as if the signature to each counterpart were on the same instrument. 23. SURVIVAL. The provisions hereof, which by their terms are to be performed or observed after the Closing Date, shall survive the Closing hereunder in accordance with the terms of this Agreement and shall be binding upon and inure to the benefit of all of the parties hereto, their heirs, legal representatives, successors and assigns. 24. CONFIDENTIALITY. Neither party shall make any announcement or disclose to the press or others without Seller's consent (which shall not be unreasonable withheld or delayed) as to the purchase/sale of the Stations prior to the filing of applications with the FCC and its first 27 public announcement of the assignment application. It is understood that the foregoing non-disclosure requirement is not intended to preclude Buyer from having discussions with financial entities, consultants, attorneys and prospective management level employees outside the Stations, who will also be advised of the need and agreement for deferred disclosure. 25. ASSIGNABILITY. Neither the Agreement nor any rights or obligations hereunder may be assigned by Buyer or Seller without the express prior written consent of the other party. Except as provided otherwise herein, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the parties. 26. GOVERNING LAW. This Agreement shall be governed by, construed (both as to validity and performance) and enforced in accordance with the laws of the State of New York applicable to agreements made and to be performed wholly within such jurisdiction. 27. SEVERABILITY. Any provision of this Agreement which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such unenforceability without invalidating the remaining provisions hereof, and any such unenforceability in any jurisdiction shall not invalidate or render unenforceable such provisions in any other jurisdiction. To the extent permitted by applicable law, the parties hereto hereby waive any provision of law now or hereafter in effect which renders any provision hereof unenforceable in any respect. 38. FURTHER ACTIONS. From time to time before, at and after the Closing, each party, at its expense and without further consideration, will execute and deliver such documents to the other party 28 as the other party may reasonably request in order more effectively to consummate the transactions contemplated hereby. IN WITNESS WHEREOF, this Asset Purchase Agreement has been duly executed by the parties hereto as of the date first above written. PORT JERVIS BROADCASTING CO., INC. By: /s/ Robert I. Wein ------------------------------------ Robert I. Wein, President NASSAU BROADCASTING PARTNERS, L.P. BY: NASSAU BROADCASTING PARTNERS, INC., ITS GENERAL PARTNER By: /s/ Louis F. Mercatanti, Jr. ----------------------------------- Louis F. Mercatanti, Jr., President 29 EX-2.12 13 0013.txt STOCK PURCHASE AGMT DTD 6/8/1999 Exhibit 2.12 STOCK PURCHASE AGREEMENT THIS AGREEMENT (this "Agreement"), dated as of June 8, 1999, between NASSAU BROADCASTING PARTNERS, L.P., a Delaware limited partnership, with an address at 600 Alexander Road, Building Two, Princeton, New Jersey 08540 ("Purchaser"), Jersey Devil Broadcasting Co., a New Jersey corporation with an address at 3122 Fire Road, Suite 200, Egg Harbor Township, New Jersey 08234, Southern Ocean Broadcasting, Inc., a New Jersey corporation with an address at P.O. Box 4627, Toms River, New Jersey 08753, Route 22, Great American Communications Co., a New Jersey corporation with an address at 1600 Union, New Jersey 07803, (collectively referred to herein as "Sellers") and Manahawkin Communications Corp., a New Jersey corporation with an address at 1600 Route 22, Union, New Jersey 07803 (the "Company"). STATEMENT OF FACTS 1. Sellers are the sole owners of all of the issued and outstanding shares of the capital stock (the "Shares") of the Company, as follows: Shares Jersey Devil Broadcasting, Inc. 100 (Non-Voting) Southern Ocean Broadcasting, Inc. 100 (Non-Voting) Great American Communications Co. 100 (Voting) TOTAL 300 2. The Company is the owner of radio station WCHR-FM on 105.7 MHz, with a principal community of Manahawkin, New Jersey (the "Station"). 3. On February 12, 1997, as amended effective June 16, 1999, the Company, Sellers and Purchaser entered into an Option Agreement to grant certain rights in a future sale contingent upon certain judicial approval ("Option Agreement"). 4. On February 12, 1997, the Company and Purchaser entered into a Loan and Security Agreement, pursuant to which the Purchaser loaned to the Company certain funds to cover the cost of construction of the Station and for working capital needs (the "Loan Agreement"). 5. On February 12, 1997, as amended effective June 16, 1999, the Company and Sellers, and Purchaser entered into a Time Brokerage Agreement ("TBA"), pursuant to which Purchaser will provide over the air program services using the facilities of the Station, and Sellers granted to Purchaser the option to purchase the Shares pursuant to the conditions contained therein. 6. Purchaser has expressed its intent to exercise its option to purchase the Shares of Sellers and has, in fact, exercised its option on the Shares of Jersey Devil and Great American. 7. Subject to the approval of The United States Bankruptcy Court on a pending request by Southern Ocean, Purchaser intends to exercise its option on the Southern Ocean Shares and upon receipt of notice of exercise of the option, Southern Ocean acknowledges that it will be bound by the terms of this Agreement. 8. Subject to the consent of the Federal Communications Commission (the "FCC"), Sellers desire to sell the Shares to Purchaser, and Purchaser desires to purchase the Shares from Sellers, all on the terms and conditions herein contained. NOW THEREFORE, in consideration of the promises, mutual covenants and agreements contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. INTENTIONALLY LEFT BLANK. 2. PURCHASE AND SALE, PRICE AND PAYMENT (a) Purchase and Sale. On the Closing Date (as hereinafter defined), subject to the terms and conditions of this Agreement, Sellers shall sell to Purchaser, and Purchaser shall purchase from Sellers, all right, title and interest, legal or equitable, in and to all of the Shares. (b) Purchase Price. In full consideration of the sale of the Shares by Sellers to Purchaser, Purchaser shall pay to Sellers as defined in and determined pursuant to Section 18.1 of the TBA, as amended, in one or more cashier's checks or wire transfers as directed by Sellers. 3. DELIVERY; FURTHER ASSURANCES. (a) Upon execution of this Agreement, Sellers shall deliver (i) all of the certificates representing the Shares to Patton Boggs LLP (the "Escrow Agent") to be held by the Escrow Agent until the Closing (or until termination of this Agreement) in accordance with the Escrow Agreement attached hereto as Exhibit A; and (ii) Agreements Not to Compete in substantially the form attached hereto as Exhibit B, executed by each of the Sellers, John Scarpa, Patricia A. Stokes, Joan Beth Hansen, and William Hansen. (b) At the Closing, Sellers shall deliver to Purchaser: (i) Certificates representing the Shares, duly endorsed in blank, or in lieu thereof, having affixed thereto stock powers executed in blank, and in proper form for transfer; 2 (ii) All property, assets, records, files, certificates and other documents, in Sellers' possession, custody or control relating to the Company, the Station and their business and affairs; (iii) A Certificate of Good Standing for the Company from the New Jersey Secretary of State; (iv) A certificate from Sellers stating that: (i) all representations and warranties of Sellers as set forth in this Agreement or in any statement, certificate, schedule, exhibit or other document delivered pursuant to this Agreement by Sellers are true and correct in all material respects, as of the Closing Date; and (ii) Sellers have, in all material respects, performed and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by Sellers at or prior to the Closing Date; (v) An opinion of counsel for Sellers, in the form attached hereto as Exhibit C; (vi) An opinion of Sellers' FCC Counsel in the form attached hereto as Exhibit D; and (viii) All other documents, agreements, certificates and consents required to be delivered to Purchaser under the provisions of this Agreement or reasonably requested by Purchaser to effect, evidence or facilitate the transactions contemplated by this Agreement. (c) At any time and from time to time after the Closing, at Purchaser's request and without further consideration, Sellers shall execute and deliver such other instruments of sale, transfer, conveyance, assignment and confirmation and take such further action as may be reasonably necessary or desirable in order to more effectively transfer, convey and assign to Purchaser, and to confirm Purchaser's title to, the Shares, and to put Purchaser in actual possession and operating control of the Company. 4. REPRESENTATIONS AND WARRANTIES BY SELLERS. As used in this Section 4, reference to Sellers' knowledge shall mean Sellers' actual knowledge without an independent investigation of the affairs of the Company. Sellers represent and warrant to Purchaser that the following statements as to Sellers, the Company and/or the Station are, where applicable, correct as of the date hereof and will be correct at the Closing Date, and all Schedules will be updated through the Closing Date: (a) Licenses. Authorization and Compliance Therewith. The Company owns and/or has all franchises, licenses, permits, consents, approvals or authorizations of any public or governmental agency materially necessary to the conduct by the Company 3 of its business as now conducted, including, but not limited to, all FCC permits necessary to construct the Station and all rights in and to the call letters WCHR-FM (the "Licenses"), each as set forth on Schedule 4(a) attached hereto, without any material conflict with the rights of others, all of which are in full force and effect, except as set forth in Schedule 4(a), and subject to no lien, charge, encumbrance, or limitation. Without material exception, to the best of Sellers' knowledge, the Company is in material compliance with all of its material obligations with respect thereto; and no event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any of the foregoing or would materially adversely affect the rights of the Company thereunder. Except as may be provided in Schedule 4(a) and as previously disclosed to Purchaser, Sellers have no knowledge of any applications or any material complaints or proceedings pending or to the best of Sellers' knowledge threatened as of the date hereof before the FCC directly relating to the business or operation of the Station other than proceedings which generally affect the broadcast industry. All returns, reports. and statements required to be filed with the FCC or other governmental agency relating to the Station have been or will be duly and timely filed, and all said reports, returns and statements are or will be complete and correct as filed. To Sellers' best knowledge, the "Public Inspection File" of the Station will be complete and in full compliance with Section 73.3526 of the FCC's Rules and Regulations on the Closing Date. (b) Operations and Assets. The Company has, and will have, no operations other than construction and operation of the Station. However, Purchaser expressly acknowledge that as of the Closing Date, sellers might not have completed construction of the Station. Except as set forth on Schedule 4(b), the Company is the owner of, and will at the Closing Date have good title to, all of the business, rights, property and assets, real and personal, tangible and intangible, used or held for use in connection with the business and operation of the Station, (the "Assets"). No action is pending or, to the knowledge of Sellers, threatened, which would contest the Company's ownership of the Assets. The Assets will not at the Closing Date be subject to any contract, sale or other agreement, except as disclosed in writing to and expressly assumed or taken subject to by Purchaser hereunder. (c) Condition of Tangible Personal Property. Attached hereto as Schedule 4(c) is a list of all equipment, electrical devices, antennas, cables, vehicles, furniture, fixtures, towers, office materials and supplies, hardware, tools, spare parts, records, tapes, discs, carts and other tangible personal property of every kind and description owned by the Company and used or held for use (including those not in operating condition) in connection with the business and operations of the Station, if any. (d) Real Property. The Company owns no real property has no leases of real property and will acquire no real property or enter into no leases of real property other than the leases it enters into as lessee with Purchaser. 4 (e) Contracts, Leases, Agreements. Etc. To the best of Sellers' knowledge, each of the contracts, agreements, easements, licenses and leases (including leases for the Leased Property), if any (collectively, "Contracts"), to which the Company is a party or to which it may be bound, are set forth on Schedule 4(e) attached hereto and are valid, binding and enforceable in accordance with their terms, and the Company is not in any material respect in default thereunder, and except as set forth on Schedule 4(e), no consents are required from the parties to such Contracts upon sale of the Shares. (f) Employees and Agreements Relating to Employment. (i) Attached hereto as Schedule 4(f) is a listing of: (1) the names of all persons currently employed by the Company, together with the amount paid or payable to each such person for their services; (2) any bonus or other material compensation arrangements and personnel benefits or policies in effect, for each employee; and (3) a complete copy of each such plan, benefit, and policy. (ii) Except as set forth on Schedule 4(f), Sellers have made no representation to any of the Company's employees concerning their continued employment, by the Company after the date of this Agreement. Any decision by Purchaser to employ any of the employees of the Company in the operation of the Station on or after 12:01 a.m. on the date of this Agreement, other than those set forth on Schedule 4(f), shall be made in its sole discretion. (iii) No labor union is currently certified, or otherwise recognized, as the collective bargaining representative for any of the Company's employees. Sellers have no actual knowledge of any labor strike, or other employee or labor controversy or dispute pending which would affect the operation of the Station. (iv) The Company is not, and on the Closing Date will not be, except as disclosed on Schedule 4(f), a party to (a) any labor contract, (b) any vacation pay, severance pay or other benefit arrangement (including ERISA or similar plans) with their employees, or (c) any employment contract or agreement which is not terminable upon termination notice of thirty (30) days. (g) Litigation. Except as set forth on Schedule 4(g) attached hereto, as of the date of this Agreement and as of the Closing Date, there are and there will be no actions, judgments, suits, proceedings, investigations or inquiries pending or, to the knowledge of Sellers, threatened against or affecting the Company or questioning the validity of any action taken or to be taken in connection with the implementation of the provisions of this Agreement, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, agency, court or instrumentality, domestic or foreign. Sellers do not know or have reasonable grounds to know of any factors or circumstances which might be the basis of any action, suit or proceeding; and, to the best of Sellers' knowledge, except as disclosed in Schedule 4(g), the Company has complied with all applicable statutes and regulations of all governmental authorities and agencies having jurisdiction over the Company. 5 (h) Compliance with Law. As of the date hereof and as of the Closing Date: The Company has complied, and is in compliance in all material respects, with all laws, rules, regulations, and orders of any governmental entity applicable to the Company and the Assets, including, without limitation, the Act and rules and regulations thereunder ("Applicable Laws"). The Company has not been charged with and is not under investigation for any violation of Applicable Laws, and, to the knowledge of Sellers, there is no any basis for any such charge or investigation. (i) Financial Statements. Sellers have heretofore furnished Purchaser with copies of the financial information of the Company as set forth on the attached Schedule 4(n) ("Financial Statements"). Except as noted therein or on Schedule 4(n), the Financial Statements are complete and correct in all material respects, were prepared in accordance with generally accepted accounting principals consistently applied throughout the periods indicated, and present fairly the financial condition of the Company as of the dates thereof. (j) Taxes. As of the Closing Date, the Company shall have timely and duly filed with the appropriate governmental agencies all tax returns, declarations of estimated tax, and tax reports required to be filed by it, and all taxes and other assessments which the Company is required to pay, withhold or collect have been timely and duly paid, withheld and collected. There are no present disputes as to taxes of any nature payable by the Company, and it has not filed an IRS Form 872 ("Consent Fixing Period of Limitations Upon Assessment of Income Tax") or otherwise agreed to extend the time for assessment of any taxes against it for any year. (k) Existence and Powers. As of the date hereof and as of the Closing Date, the Company is a corporation duly organized, validly existing and in good standing under the laws of the State of New Jersey and has the power and authority to own or lease its properties and to carry on business as now being conducted. Each of the Sellers has full power and authority to enter into this Agreement and to carry out the transactions contemplated hereby, and this Agreement has been duly executed and delivered by Sellers and constitute the legal, valid and binding obligation of Sellers, enforceable in accordance with its terms. (l) No Conflict. As of the date hereof and as of the Closing Date, neither the execution and delivery of this Agreement by Sellers nor the consummation of the transaction contemplated hereby in accordance with the terms hereof (i) will materially conflict with, result in a material breach of, or constitute a material default under any indenture, mortgage, lease or other agreement, to which the Company or Sellers are a party or to which they or any of their properties may be subject or (ii) will result in a material violation of any order, writ, injunction, decree or award of any court or governmental authority to which the Company or Sellers or any of their properties may be subject. 6 (m) Charter Documents. Attached hereto as Exhibits F and G, respectively, are true and complete copies of the Certificate of Incorporation and the By-Laws of the Company, and all amendments thereto. As of the date hereof and as of the Closing Date, such Certificate of Incorporation and By-Laws have not been and will not be modified, amended or revoked and remain in full force and effect. (n) No Approvals. Except for the consent of the FCC as to the Great American stock and the Bankruptcy Court for the Southern Ocean stock, no approval, consent, withholding of objection or other authorization is required or as of the Closing Date, will be required from any court, administrative agency or governmental authority in connection with the execution, delivery or performance by Sellers of this Agreement and the related agreements referred to herein. (o) Ownership of Shares. Sellers own, beneficially and of record, all of the Shares, and no other person or entity owns beneficially or of record any interest in any of the Shares. Sellers now have and as of the Closing Date will have, and will transfer to Purchaser, good, valid and marketable title to all of the Shares, free and clear of all security interests, claims, liens, equities, options, proxies and other encumbrances whatsoever, and the Shares, when so sold and delivered, will be validly issued, fully paid and nonassessable. There is no transfer restriction, subscription, option, warrant, convertible security, right, call, contract, voting trust, irrevocable proxy, voting arrangement, commitment, understanding or agreement (other than this Agreement) relating to the Shares or their voting, issuance, sale, redemption or transfer. (p) Directors and Officers. The present directors and officers of the Company are set forth on the attached Schedule 4(u). Such persons will be the directors and officers as of the Closing Date, and the written resignations of such officers and directors shall be delivered to Purchaser concurrently with the delivery of the certificates representing the Shares. (q) Bank Accounts. Attached hereto as Schedule 4(v) is a listing of all bank accounts of the Company. Sellers shall take any and all action and execute any documents required to close all accounts within thirty days of the Closing Date. (r) Business of Company. The Company shall not engage in any business other than the operation of the Station to the extent required by the TBA and this Agreement. (s) Absence of Certain Changes. Since February 12, 1997, through the Date of this Agreement, there has not been (i) any material adverse changes in the property of the Company or any material labor dispute, grievance or organizational effort affecting the Assets, taken as a whole; (ii) any physical damage, destruction or loss (not covered by insurance) materially and adversely affecting the Assets or business of the Company, taken as a whole; (iii) any sale, assignment, lease or other transfer or disposition of any of the Assets or Fee Property of the Company except in the ordinary course of business and with 7 adequate replacement property being acquired as necessary; or (iv) any waiver of any right resulting in a materially adverse affect on the Assets. (t) No Liabilities. As of the Closing Date, the Company shall not have any outstanding debt, other than amounts owed to Purchaser pursuant to the Loan Agreement or any accounts payable incurred in the ordinary course of business. 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. Purchaser represents and warrants to Sellers that the following statements as to the Purchaser are correct as of the date hereof and, where specifically indicated, will be correct at the Closing Date: (a) Powers of Purchaser. As of the date hereof, Purchaser has, and it will have as of the Closing Date, all the requisite power and authority to enter into this Agreement and to carry out the transactions contemplated hereby, and this Agreement has been duly executed and delivered by Purchaser and constitutes the valid and binding obligation of Purchaser, enforceable in accordance with its terms. (b) No Conflicts. As of the date hereof and as of the Closing Date, neither the execution and delivery of this Agreement by Purchaser nor the consummation of the transactions contemplated hereby in accordance with the terms hereof (i) will materially conflict with, result in a material breach of, or constitute a material default under, any indenture, mortgage, lease or other agreement, to which Purchaser is a party or to which Purchaser or any of Purchaser's properties may be subject, or (ii) will result in a material violation of any order, writ, injunction, decree or award of any court or governmental authority to which Purchaser or any of Purchaser's properties may be subject. (c) No Approvals. Except for the consent of the FCC, no approval, consent, withholding of objection or other authorization is required or as of the Closing Date will be required, from any court, administrative agency or governmental authority in connection with the execution, delivery or performance by Purchaser of this Agreement and the related agreements referred to herein. (d) FCC Qualifications. As of the date hereof and as of the Closing Date, Purchaser is qualified, and knows of no reason why it should not be found qualified by the FCC, to be the transferee of control of the Company. (e) Litigation. As of the date of this Agreement and as of the Closing Date, there are and there will be no actions, judgments, suits, proceedings, investigations or inquiries pending or, to the knowledge of Purchaser, threatened against or affecting the Purchaser or questioning the validity of any action taken or to be taken in connection with the implementation of the provisions of this Agreement, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, agency, court or instrumentality, domestic or foreign. Purchaser does not know or have reasonable grounds to know of any factors or circumstances which might be the basis of any action, suit 8 or proceeding; and, to the best of Purchaser's knowledge, Purchaser has complied with all applicable statutes and regulations of all governmental authorities and agencies having jurisdiction over the Purchaser. (f) Absence of Insolvency. As of the date hereof and as of the Closing Date, no insolvency proceedings of any character, including, without limitation, bankruptcy, receivership, reorganization, composition or arrangement with creditors, voluntary or involuntary, affecting the Purchaser or any of its respective assets or properties, are pending or, to the knowledge of Purchaser, threatened, and the Purchaser has made no assignment for the benefit or creditors, nor taken any action with a view to, or which would constitute the basis for, the institution of any such insolvency proceedings. 6. CONDUCT PRIOR TO CLOSING. (a) Access and Information. Sellers shall give Purchaser and its representatives reasonable access throughout the period prior to Closing to the operations, properties, books, contracts, agreements, leases, commitments and records of the Company at reasonable times, provided that the normal operations of the Company's business shall not be disrupted. (b) Conduct of Station Business. Between the date hereof and Closing: (i) Sellers shall produce the consent of any third parties required by any contract, lease or agreement upon change of ownership of the Company, if any. (ii) To the extent required under the TBA, Sellers shall cause the Company to: (1) conduct the business of the Station in a prudent and responsible manner in good faith and in compliance with the terms of the Licenses and Applicable Laws; and (2) Sellers and Purchaser shall keep all of the Assets to be transferred hereunder in substantially the same operating condition and repair as of the date hereof, reasonable wear and tear excepted; (iii) The Company shall not, outside the ordinary course of business (i) hire additional personnel or unreasonably increase the compensation or bonuses payable or to become payable to any of the Company's employees, except as may be required by the FCC; (ii) enter into an agreement to sell, assign, lease, exchange or otherwise transfer or dispose of any of the Assets; (iii) enter into any new contract or renegotiate, modify, amend, renew, or terminate any existing contract, except that the Company may, in the ordinary and usual course of business, enter into: (1) any contract(s) terminable on thirty (30) days notice or less without premium or penalty; and (2) any contract(s) consented to by Purchaser in writing; (iv) change the Station's call letters, or change the Company's facilities, or apply for any construction permit(s) with the FCC, without Purchaser's consent, which will not be unreasonably withheld or delayed, or make any material adverse changes in the Company's leasehold improvements and other improvements and fixtures, (v) except as required by law or any governmental agency, disclose any information relating to the Company to any third party, other than to the Company's authorized employees, agents and 9 professional advisors in the ordinary course of business and other than to Purchaser and Purchaser's authorized representatives as provided for herein; or (vi) except for the Loan, borrow monies. (iv) The parties shall maintain in full force and effect the insurance described in Schedule 4(j); (v) Sellers shall give Purchaser notice of any unusual operating problems or developments affecting the Company between the date hereof and the Closing Date, including, but not limited to, any problem or development which would materially adversely affect the Assets, and keep Purchaser fully apprised of all matters having material financial impact on the Company; and (vi) Sellers and Purchaser shall conduct the business of the Station in accordance with the TBA. In the event that there is a conflict between this Agreement and the TBA with respect to the conduct of the Station, the TBA shall govern. (c) Engineering Inspection. It is agreed that within ten (10) days prior to the Closing Date, provided the Station is on-the air as of that date, Purchaser's engineer may inspect the Assets to insure that its equipment complies with all warranties and conditions set forth herein. Sellers agree to extend full cooperation to said engineer, including such access to the equipment and to logs pertaining thereto at such time or times as said engineer shall reasonably request. If Purchaser's engineer reports that the equipment fails to comply with said warranties, and Sellers dispute the report, Purchaser and Sellers shall jointly hire and pay a consulting engineer to give a report on the disputed item(s). The consulting engineer's report shall be final, and Sellers shall repair any equipment that the consulting engineer reports does not meet the warranty set forth in Subsection 4.2(b) prior to the Closing; provided, however, Sellers' obligation to repair shall not exceed Fifteen Thousand Dollars ($15,000). If the repairs required exceed such cap and Sellers refuse to make such repairs in excess of the cap, Purchaser may, at its sole option, either proceed with this Agreement or terminate this Agreement and have the Exercise Payment returned to it. (d) Risk of Loss. The risk of any loss, damage or destruction to any of the Assets from fire or other casualty or cause shall be borne by the Company at all times prior to 12:01 a.m. on the Closing Date. Upon the occurrence of any loss or damage to any material portion of the Assets as a result of fire, casualty or other cause prior to Closing, Sellers shall notify Purchaser of same in writing immediately, stating with particularity the extent of such loss or damage incurred, the cause thereof if known, and the extent to which restoration, replacement and repair of the Assets lost or destroyed will be reimbursed under any insurance policy with respect thereto. Subject to the provisions hereof, Purchaser shall have the option (but not the obligation), in the event the loss or damage exceeds One Hundred Thousand Dollars ($100,000.00) and the property cannot be substantially repaired or restored within thirty (30) days, exercisable within ten (10) days after receipt of such notice from Sellers to: (i) postpone the Closing until such time 10 as the property has been completely repaired, replaced or restored, unless the same cannot be reasonably effected within two (2) months of notification; (ii) elect to consummate the Closing and accept the property in its "then" condition, in which event Sellers shall at the Closing assign any and all rights under any insurance claim covering the loss and pay over any proceeds under any such insurance policy theretofore received by the Company with respect thereto; or (iii) rescind this Agreement at no cost or expense to Purchaser and declare the Agreement of no further binding force and effect, and have the Deposit Payment returned to it, if such repairs, replacements or restorations are not completed within ninety (90) days after the date specified herein as the Closing Date, provided that such repairs, replacements or restorations are necessary to the normal operation of the Stations. In the event Purchaser elects to postpone the Closing Date as provided in clause (i) of this Subsection, the parties hereto will cooperate to extend the time during which this Agreement must be closed as specified in the consent of the FCC referred to herein. (e) Confidentiality. Between the date of this Agreement and the Closing Date, Purchaser will maintain strict confidentiality with respect to all documents and information furnished by or on behalf of the Company or the Sellers (except for documents or information required to be disclosed by law), and, if this Agreement is terminated, Purchaser shall return to Sellers all such documents and information. Notwithstanding the foregoing, Purchaser may make disclosure that may be required: (i) by its lenders; (ii) in the preparation of federal, state and local tax returns; (iii) pursuant to any federal or state securities laws; or (iv) as may be necessary to advise any of Purchaser's investors or advisors, provided that, in such case, Purchaser shall advise the investors of the confidentiality of the information. (f) Prohibited Action. Between the date of this Agreement and the Closing Date, neither Purchaser nor Sellers will commit any act or omission that would: (i) prevent the Company from transferring control of the Licenses or, as to Purchaser, as owner or operator of the Company, the Station and the Assets, (ii) jeopardize the validity of the Licenses; or (iii) interfere with the existing relationships between the Station and its advertisers, suppliers and others. (g) Board of Directors. Simultaneously with the execution of this Agreement, Sellers shall elect Louis F. Mercatanti, Jr., or his designee, to the Board of Directors of the Company. The Sellers' shall continue to elect Louis F. Mercatanti, Jr. to the Board through the Closing Date or sooner upon termination of this Agreement. 7. CLOSING (a) Closing Date. Unless the parties require additional time to cure pursuant to Sections 11(b)(1)(iii), 6(c)(i), 6(c)(iv), or 6(d) or unless both parties consent to a later Closing, Closing shall occur by the latest of the following, on a day designated by Purchaser: (i) six months after the Exercise Date; or (ii) within five (5) calendar days of the date upon which the approval of the FCC required for the consummation of the 11 transactions contemplated herein shall become a "Final Order," provided however, "Final Order" means the date on which the consent of the FCC is no longer subject to administrative or judicial reconsideration, review, appeal or stay. The parties hereby agree and stipulate that, absent the pendency of any petition, application or motion seeking reconsideration, review, appeal or stay of the Consent, and absent any FCC action reconsidering, reviewing, staying or modifying the Consent, such Consent shall be treated as final as of 12:01 A.M. on the forty-first day after the date of public notice issued by the FCC approving the assignment of the Licenses to Buyer. The Closing shall take place at the Trenton, New Jersey offices of Sterns & Weinroth, A Professional Corporation, at 9:00 A.M. local time, or such other time or place as mutually agreed, provided, however, that the parties acknowledge tht in the event the Bankruptcy Court has not yet given its approval to the option to acquire the Southern Ocean Shares as of the date of the FCC consent to grant of the Transfer Application, the closing of the sale of The Southern Ocean Shares to Purchaser shall occur as seen as possible after receipt of all necessary Bankruptcy Court approvals and in no event later then ten (10) days after such approvals.. (b) Condition to Obligations of Purchaser. The obligation of Purchaser to consummate the purchase of the Shares at the Closing shall be subject to the performance, in all material respects, on or prior to the Closing Date, of all of the covenants and agreements as set forth elsewhere in this Agreement to be performed by Sellers, and upon the following additional conditions: (i) The representations and warranties of Sellers are true or shall be true in all material respects as of the dates set forth in Section 4 and the Sellers shall have updated all Schedules through the Closing Date; (ii) Except for normal wear and tear, there shall not have occurred any material adverse change in the condition of the Assets as a result of actions by other than the Purchaser; (iii) The consents required from all governmental agencies (including, without limitation, the Final Order of the FCC) to Purchaser's acquisition of the Shares shall have been granted, without any condition materially adverse to Purchaser, and such consents shall be valid and outstanding on the Closing Date; (iv) No action or proceeding shall be pending or threatened, challenging the validity of this Agreement or seeking to delay the consummation of any of the transactions for which this Agreement provides, which in the reasonable opinion of Purchaser is material to the transactions contemplated by this Agreement; (v) Sellers shall have obtained and delivered to Buyer the written consents of all requisite parties to assign and transfer to Buyer those Contracts material to the operation of the Stations without conditions materially adverse to Buyer, if any; 12 (vi) Sellers shall have in all material respects performed and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by it prior to and on the Closing Date; and Purchaser shall have the right to waive any or all of the foregoing conditions of Closing at its sole option and risk. (c) Condition to Obligations of Sellers. The obligation of Sellers to consummate the sale of the Shares at the Closing shall be subject to the payment by Purchaser of the Purchase Price and the receipt of the consents required from all governmental agencies (including, without limitation, the Final Order of the FCC) to Purchaser's acquisition of the Shares, and such consents shall be valid and outstanding on the Closing Date. Sellers shall have the right to waive all of the foregoing condition of Closing at its sole option and risk. (d) No Right of Reversion. Both Sellers and Purchaser agree that the Sellers have retained no right of reversion for the WCHR-FM licenses, no right to assignment of such licenses, and have not reserved the right to use the facilities of the Company after the Closing Date for any reason whatsoever. 8. APPLICATION FOR FCC APPROVAL. (a) Filing and Prosecution of Application. Within ten (10 business) days of the date hereof, Purchaser and the Company shall join in an application to the FCC requesting the FCC's written consent, as applicable (the "FCC Consent", to the sale of the Shares to Purchaser, and to the consummation of the transactions contemplated by this Agreement (the " Transfer Application"). All parties shall promptly respond to any requests for the submission of additional information and shall vigorously oppose any protests, petition to deny, petition for reconsideration or appeal of the FCC Consent may be filed. Purchaser and Sellers shall proceed with due diligence and promptly take all steps necessary to the expeditious prosecution of such application to a favorable conclusion, using their best efforts throughout. (b) Expenses. Each party shall bear its own expenses in connection with the preparation of the applicable sections of the Transfer Application and in connection with the prosecution of such application. Sellers and Purchaser will divide and pay equally the filing and grant fees charged by the FCC. (c) Designation for Hearing. If, for any reason, the Transfer Application is designated for hearing by the FCC or if the parties are notified by the FCC in writing of its intention to designate the Application, either party, if not then in default, shall have the right by written notice within fifteen (15) days of such designation for hearing, to terminate this Agreement. 13 (d) Control of Station. The Sellers shall retain complete and unfettered control over the operation of the Station until this Agreement is consummated and this Agreement shall not be consummated until receipt of the FCC Consent to the Transfer Application. (e) Best Efforts. Each party hereto agrees to use its best efforts in the performance and fulfillment of all terms and conditions of this Agreement and the TBA applicable to such party and in filing the Transfer Application , and agrees to execute such other and further documents as may be reasonably required to carry out the intent of this Agreement. (f) Renegotiation to Conform to FCC Policies. In the event the FCC determines at any time that any provision of this Agreement or of the TBA is violates of FCC policies and regulations, the parties agree that they will negotiate in good faith to remove the provision found violative or replace it with a provision consistent with FCC policies and regulations while the TBA remains in full force and effect. 9. BULK SALES LAW. Purchaser hereby waives compliance by Sellers with the provisions of all Bulk Sales Laws, or other similar provisions, provided, however, that Sellers agree to indemnify and hold Purchaser harmless for any claims arising thereunder. 10. INDEMNIFICATION. (a) Survival of Representations and Warranties. All covenants and agreements pertaining to matters to be performed after Closing and all representations and warranties contained in this Agreement shall survive for a period not to exceed two (2) years after the Closing Date ("Survival Period"), except that the representations and warranties (a) with respect to title, if any, or (b) which the party making the same knew or would have, through the exercise of reasonable diligence, known to be false shall continue indefinitely. No claim which is the subject of the Survival Period may be brought under this Agreement or with respect to the transactions described herein 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 Survival Period. In the event such notice is so given, the right to indemnification with respect thereto under this Section 10 shall survive the Survival Period until such claim is finally resolved and any obligations with respect thereto are fully satisfied. (b) Indemnity by Sellers. Sellers agree to pay and discharge and to save and protect Purchaser and its partners, officers, directors, shareholders and affiliates free and harmless from all obligations, claims and demands (including reasonable attorneys' fees incurred by Purchaser with respect thereto) (collectively "Sellers' Obligations") against, arising out of or in connection with any material breach or violation by Sellers of any covenant, agreement or warranty herein contained, or the inaccuracy of any material representation of Sellers made in this Agreement. 14 (c) Indemnity by Purchaser. Purchaser agrees to pay and discharge and to save and protect Sellers free and harmless from all obligations, claims, and demands (including but not limited to attorney fees incurred by Sellers with respect thereto) against, arising out of or in connection with any material breach of violation by Purchaser of any covenant, agreement or warranty herein contained or the inaccuracy of any material representation of Purchaser made in this Agreement. (d) Indemnification Procedure: Right of Offset. In the event that any party hereto asserts a claim for indemnification hereunder, such party seeking indemnification shall give written notice to the indemnifying party specifying the nature and the amount, if known, of the claim asserted. The indemnifying party shall then have the right, using counsel reasonably satisfactory to the party seeking indemnification, to investigate, secure, contest or settle the claim alleged by such third party (hereinafter called a "contest"), provided that the party seeking indemnification may participate voluntarily, at its own expense, in any such contest through representatives and counsel of its own choice, and, provided further, that any such action by the indemnifying party relating to the contest shall be without prejudice to the party seeking indemnification. Except as provided otherwise in Section 10(d), the indemnifying party shall bear all costs of such contests and shall indemnify and hold the party seeking indemnification harmless against and from all costs, fees, and expenses of such contest. Unless and until the indemnifying party elects to prosecute the contest, the party seeking indemnification shall have the full right, at its option, to do so and to look to the indemnifying party under the provisions of this Agreement for the amount of the costs, if any, of prosecuting the contest. The failure of the indemnifying party to respond in writing to the aforesaid notice of the party seeking indemnification with respect to such contest within twenty (20) days after the receipt thereof shall be deemed an election not to prosecute the same. If the indemnifying party fails to prosecute the contest and the party seeking indemnification does not prosecute the contest or does so and the decision is rendered against it, the amount paid by the party seeking indemnification to the third party in settlement or satisfaction of the contest shall be deemed a valid claim hereunder. In the event that the contest involves any Sellers' Obligations, Purchaser shall have the right to offset the amount of the costs, if any, incurred by Purchaser in prosecuting the contest together with any sums owed in connection with the resolution or settlement thereof against amounts which may be owed by Purchaser to Sellers. The parties hereto shall make mutually available to each other all relevant information in their possession relating to any such contest and shall cooperate in the defense thereof. 11. TERMINATION BEFORE CLOSING; DEFAULT AND REMEDIES. (a) Termination before Closing. If Closing shall not have previously occurred, this Agreement may be terminated and rescinded and the Seller shall be given possession of the Shares within ten (10) days of termination: 15 (i) Pursuant to Section 6; (ii) By Purchaser, upon the occurrence of a Sellers' Event of Default (as defined in Section 11(b)) if the Purchaser is not then in default, or upon failure of a condition precedent to Purchasers' obligation to close set forth in Section 7(b); or (iii) By Sellers, upon the occurrence of a Purchaser's Event of Default (as defined in Section 11(b)) if the Sellers are not then in default, or upon failure of a condition precedent to Sellers' obligation to close set forth in Section 7(c). (b) Default and Remedies. (i) Purchaser's Event of Default. The failure by Purchaser to consummate the transactions contemplated by this Agreement in violation of the provisions of this Agreement shall constitute a material default of this Agreement by Purchaser ("Purchaser's Event of Default"). The failure by Purchaser to perform any other of its obligations under this Agreement, where such failure shall continue for a period of ten (10) days after delivery of written notice of demand therefor from Seller to Purchaser; provided, however, that if more than ten (10 days are reasonably required to cure such failure, then Purchaser shall not be deemed to be in default thereof if Purchaser, in good faith, has commenced such cure within said ten (10) day period and thereafter diligently prosecutes such cure to completion. (ii) Sellers' Event of Default. The occurrence of any one or more of the following events shall constitute a material default of this Agreement by Sellers ("Sellers' Event of Default"): (1) The material breach of any material representation or warranty by Sellers hereunder unless such breach is cured prior to the Closing Date; (2) The failure by Sellers to consummate the transactions contemplated by this Agreement in violation of the terms of this Agreement; (3) The failure by Sellers to perform any other of its obligations under this Agreement, where such failure shall continue for a period of ten (10) days after delivery of written notice of demand therefor from Purchaser to Sellers; provided, however, that if more than ten (10) days are reasonably required to cure such failure, then Sellers shall not be deemed to be in default thereof if Sellers, in good faith, have commenced such cure within said ten (10) day period and thereafter diligently prosecutes such cure to completion and completes such cure prior to Closing. (iii) Purchaser's Right Upon Default. Sellers acknowledge that the Company is of a special, unique, and extraordinary character, and that any breach of this Agreement by Sellers could not be compensated for by damages. Accordingly, upon the occurrence of a Sellers' Event of Default, Purchaser shall be entitled, in addition to rescission or any other remedies that it may have, to enforcement of this Agreement (subject 16 to obtaining any required approval of the FCC) by a decree of specific performance or injunctive relief requiring Sellers to fulfill its obligations under this Agreement. In any action to specifically enforce Sellers' obligation to close the transaction contemplated by this Agreement, Sellers shall waive the defense that there is an adequate remedy at law or in equity and agrees that Purchaser shall be entitled to obtain specific performance of Sellers' obligation to close hereunder without being required to prove actual damages. As a condition to seeking specific performance, Purchaser shall not be required to tender the Purchase Price but shall be required to demonstrate that Purchaser is ready, willing and able to tender the Purchase Price and consummate the purchase of the Shares as contemplated hereunder. Nothing in this subsection shall be construed to limit Purchaser's ability to sue Sellers for damages. (v) Sellers' Right Upon Default. Upon the occurrence of a Purchaser's Event of Default, Sellers shall have only the rights set forth in Sections 11(a) and 11(b)(vi) (vi) Liquidated Damages. In the event of termination of this Agreement for any reason whatsoever and the Sellers are not in breach, the Sellers shall be entitled to retain the Initial Payments, defined in and paid pursuant to the Option Agreement, and the Option Payment, defined in and paid pursuant to as amended June 16, 1999, (the "Liquidated Damages Amount"), as liquidated damages, and not as a penalty, in accordance with Section 18.1 of the TBA. The parties agree that the Liquidated Damages Amount constitutes a reasonable sum considering all of the circumstances existing on the date of this Agreement, including the relationship of the sum to the range of harm to Sellers that could be reasonably anticipated and the anticipation that proof of actual damages would be costly or inconvenient. In placing their initials at the place provided below, Buyer and Sellers each specifically confirms the accuracy of the statements made above and the fact that each was represented by counsel who explained the consequences of this liquidated damages provision at the time this Agreement was made. The Sellers' remedy for default by the Purchaser shall be limited to Liquidated Damages and return of possession of the Shares. SELLERS INITIAL HERE [INITIAL] ---------- BUYER INITIAL HERE [INITIAL] ---------- 17 12. ACCESS TO BOOKS AND RECORDS. After the Closing Date, Purchaser and Sellers shall each allow the other reasonable access during normal business hours upon reasonable prior notice to their respective books and records pertaining to the operation of the Stations prior to the Closing Date and shall retain such records for a period of not less than three (3) years after the Closing Date. 13. NOTICES. All notices and other communications hereunder shall be in writing and be deemed to have been duly given if delivered personally or by overnight courier or sent by telecopy or mailed by registered mail, postage prepaid, addressed as follows: (a) If to Sellers, to: Mr. John Scarpa President Jersey Devil Broadcasting Co. c/o 3122 Fire Road Suite 200 Egg Harbor Township, NJ 08234 Joan Beth Hansen, Esquire President Southern Ocean Broadcasting, Inc. P.O. Box 4627 Toms River, NJ 08753 Ms. Patricia A. Stokes Great American Communications Co. c/o JL Media 1600 Route 22 Union, NJ 07083 with a copy to: Stephen Diaz Gavin, Esq. Patton Boggs LL.P. 2250 M Street, N.W. Washington, D.C. 20037 (b) If to Purchaser, to: Louis F. Mercatanti, Jr. Nassau Broadcasting Partners, L.P. 600 Alexander Road, Building 2 Princeton, NJ 08540 18 with a copy to: Mark D. Schorr, Esq. Sterns & Weinroth. P.C. 50 West State Street, Suite 1400 P.O. Box 1298 Trenton, NJ 08607-1298 or such other address with respect to any party hereto as such party may from time to time notify (as provided above) to the other party hereto. Any such notice, demand or communication shall be deemed to have been given (i) if so mailed, as of the close of the third business day following the date so mailed, and (ii) if personally delivered or otherwise sent as provided above, on the date delivered or sent if sent by telecopy and on the next business day after the date sent in all other cases. 14. CONTROL OF STATION. Notwithstanding that certain duties shall be delegated to the Purchaser under the TBA, between the date hereof and the Closing Date, Sellers shall retain complete and unfettered control over the operation of the Station. 15. EXPENSES. Unless otherwise agreed to in writing by the parties hereto, each party shall pay its own costs and expenses, including any and all legal and accounting fees, of its performance and compliance with all conditions and agreements contained herein on its or their part to be performed or complied with. 16. BROKERS. Purchaser and Sellers acknowledge and represent and warrant to each other that Blackburn & Company is the sole "Broker" in this transaction. Purchaser and Sellers each represent to the other that there is no other finder, consultant or broker involved in this transaction and that they have not agreed to pay any other finder, consultant or broker fee in connection with this transaction. If any other finder, consultant or broker claims a fee, the party whose actions led to that claim will bear sole responsibility for paying or settling that claim and shall indemnify the other party against the same. Sellers shall be solely responsible for the Broker's fees. 17. DISCLOSURE OF EXHIBITS AND SCHEDULES. Notwithstanding anything to the contrary contained in this Agreement or in any of the Exhibits and Schedules, any information disclosed in one Exhibit or Schedule, as the case may be, shall be deemed to be disclosed in all Exhibits and Schedules. Certain information set forth in the Exhibits and Schedules, as the case may be, is included solely for informational purposes and may not be required to be disclosed pursuant to this Agreement. 19 The disclosure of any information shall not be deemed to constitute an acknowledgment that such information is required to be disclosed in connection with the representations and warranties made by Sellers in this Agreement or is material, nor shall such information be deemed to establish a standard of materiality. Except as expressly set forth in this Agreement, there are no representations or warranties, express or implied, being made by Sellers. 18. MISCELLANEOUS. (a) Complete Agreement. This Agreement, the Schedules and Exhibits hereto, together with the TBA and the Loan Agreement, constitute the final, integrated understanding and agreement of the parties with respect to the subject matter hereof, supersede all prior agreements, covenants, arrangements, letters, communications, representations or warranties, whether oral or written, and may not be modified, amended or terminated except by a written agreement specifically referring to this Agreement signed by the parties hereto. (b) No Waivers. No waiver of any breach or default hereunder shall be considered valid unless in writing and signed by the party giving such waiver, and no such waiver shall be deemed a waiver of any subsequent breach or default of the same or similar nature. No failure on the part of any party to exercise, and no delay in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege, and no waiver whatever shall be valid unless in writing signed by the party or parties to be charged and then only to the extent specifically set forth in such writing. All remedies, rights, powers and privileges, either under this Agreement or by law or otherwise afforded the parties to this Agreement, shall be cumulative and shall not be exclusive of any remedies, rights, powers and privileges provided by law. Each party hereto may exercise all such remedies afforded to it in any order of priority. (c) No Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that neither party may transfer or assign its rights or delegate its performance hereunder without the prior written consent of the other party, except that Purchaser shall be entitled to assign its rights hereunder at the Closing. This agreement shall be for the sole benefit of the parties hereto and their respective successors and assigns, and shall not be construed to provide any benefits to any third parties. (d) Headings. Paragraph headings contained herein are for the purposes of convenience only and are not intended to define or limit the contents of any Schedule, Exhibit, Section or paragraph. (e) Further Assurances. Each party hereto shall cooperate and shall take such further action and shall execute and deliver such further documents as may reasonably be requested by any other party in order to carry out the provisions and purposes of this Agreement. 20 (f) Choice of Law. This Agreement and all amendments thereto shall be governed by and construed in accordance with the laws of the State of New Jersey without regard to principles of conflicts of law. (g) Severability. Any provisions of this Agreement or any of the other documents delivered in connection with this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provision of this Agreement or such other document or affecting the validity or enforceability of such provision in any other jurisdiction. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written. ATTEST: MANAHAWKIN COMMUNICATIONS CORPORATION By: /s/ PATRICIA A. STOKES - ----------------------------------- ----------------------------------- PATRICIA STOKES, President SELLERS: ATTEST: JERSEY DEVIL BROADCASTING CO. /s/ JILL KRASUSKI By: /s/ JOHN F. SCARPA - ----------------------------------- ----------------------------------- JOHN F. SCARPA, President ATTEST: GREAT AMERICAN Communication CO. By: /s/ PATRICIA A. STOKES - ----------------------------------- ----------------------------------- PATRICIA STOKES, President PURCHASER: ATTEST: SOUTHERN OCEAN BROADCASTING, INC. /s/ EDWARD [ILLEGIBLE] By: /s/ JOAN BETH HANSEN, Pres. - ----------------------------------- ----------------------------------- JOAN BETH HANSEN, President ATTEST: NASSAU BROADCASTING PARTNERS, L.P. By: Nassau Broadcasting Inc., its General Partner By: /s/ LOUIS F. MERCATANTI - ----------------------------------- ----------------------------------- LOUIS F. MERCATANTI, President 21 EX-4.4 14 0014.txt UNITS PURCHASE AGMT, DTD 5/4/2000 EXHIBIT 4.4 ================================================================================ UNITS PURCHASE AGREEMENT among NASSAU BROADCASTING PARTNERS, L.P., as Issuer, and MERRILL LYNCH CAPITAL CORPORATION, CAISSE DE DEPOT ET PLACEMENT DU QUEBEC, THE BANK OF NOVA SCOTIA, OZ MASTER FUND, LTD., and BANK OF MONTREAL as Purchasers Dated as of May 4, 2000 Relating to: 117,359 Units consisting of $117,359,000 Aggregate Principal Amount at Maturity of 13% (resetting to 14%) Senior Discount Notes due 2010 and 19,303.86 LP Units plus Additional LP Units as Provided Herein ================================================================================ Table of Contents -----------------
Page ---- ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS ------------------------------------------ 1.01. Definitions.............................................................................. 2 1.02. Computation of Time Periods.............................................................. 35 ARTICLE 2 AUTHORIZATION, ISSUANCE AND SALE OF SECURITIES -------------------------------------------------------- 2.01. Authorization of Issue................................................................... 35 2.02. Sale..................................................................................... 39 2.03. Closing.................................................................................. 39 2.04. Allocation of Purchase Price............................................................. 39 ARTICLE 3 CONDITIONS TO CLOSING ------------------------------- 3.01. Representations and Warranties........................................................... 39 3.02. Performance; No Default Under Other Agreements........................................... 40 3.03. Compliance Certificates.................................................................. 40 (a) Officers' Certificate.................................................................... 40 (b) Secretary's Certificate.................................................................. 40 3.04. Opinions of Counsel...................................................................... 40 3.05. Recapitalization......................................................................... 40 3.06. No Adverse Events; No Operations of the Company.......................................... 41 3.07. Financial Information.................................................................... 41 3.08. Proceedings and Documents................................................................ 41 3.09. Purchase Permitted by Applicable Law, Etc................................................ 41 3.10. Transaction Documents in Force and Effect; Information................................... 42 (a) Transaction Documents.................................................................... 42 (b) Accuracy of Information.................................................................. 42 3.11. No Violation; No Legal Constraints; Consents, Authorizations and Filings, Etc............ 42 3.12. Bank Credit Agreement.................................................................... 43 3.13. Acquisition Agreements................................................................... 43 3.14. Repayment of Existing Credit Facilities.................................................. 43 3.15. Spectrum Equity Commitments.............................................................. 43 3.16. Payment of Fees and Expenses............................................................. 43 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY ------------------------------------------------------- 4.01. Due Incorporation; Power and Authority................................................... 43 4.02. Capitalization........................................................................... 44 4.03. Subsidiaries............................................................................. 45 4.04. Due Authorization, Execution and Delivery................................................ 45 (a) Agreement................................................................................ 45 (b) Fourth Restated Partnership Agreement.................................................... 45 (c) Notes and Exchange Notes................................................................. 46
i (d) Initial LP Units.......................................................................... 46 (e) Antidilutive Initial LP Units and Incremental LP Units; Common Stock...................... 46 (f) Exchange and Registration Rights Agreement................................................ 46 (g) Mezzanine Investors Common Stock Registration Rights Agreement............................ 47 (h) Other Transaction Documents............................................................... 47 4.05. Non-Contravention; Authorizations and Approvals........................................... 47 4.06. Company Financial Statements.............................................................. 48 4.07. Absence of Undisclosed Liabilities or Events.............................................. 48 4.08. No Actions or Proceedings................................................................. 49 4.09. Title to Properties....................................................................... 49 4.10. Intellectual Property Rights.............................................................. 49 4.11. Taxes..................................................................................... 50 4.12. ERISA and Foreign Employee Benefit Matters................................................ 51 4.13. Private Offering; No Integration or General Solicitation.................................. 51 4.14. Eligibility for Resale Under Rule 144A.................................................... 52 4.15. Status Under Certain Statutes............................................................. 52 4.16. Insurance................................................................................. 52 4.17. Use of Proceeds; Margin Regulations....................................................... 52 4.18. Existing Indebtedness; Future Liens....................................................... 52 4.19A. Compliance with Laws; Permits............................................................. 53 4.19B. Environmental Matters; Environmental Investigations....................................... 53 4.20. Solvency.................................................................................. 54 4.21. Affiliate Transactions.................................................................... 54 4.22. Material Contracts........................................................................ 54 4.23. No Changes to Applicable Law.............................................................. 55 4.24. Fees...................................................................................... 55 4.25. Brokerage Fees............................................................................ 55 4.26. Absence of Labor Dispute.................................................................. 55 4.27. FCC Matters............................................................................... 55 ARTICLE 5 REPRESENTATIONS OF THE PURCHASERS ------------------------------------------- 5.01. Purchase for Investment................................................................... 58 ARTICLE 6 COVENANTS TO PROVIDE INFORMATION ------------------------------------------ 6.01. Reports to Holders........................................................................ 58 (a) SEC Reports............................................................................... 58 (b) Chief Financial Officer Certificates...................................................... 59 (c) Other Information......................................................................... 59 (d) Notice of Default or Event of Default..................................................... 59 (e) Additional Information to Holders of Other Indebtedness................................... 59 (f) Original Issue Discount Information....................................................... 60 ARTICLE 7 OTHER AFFIRMATIVE COVENANTS ------------------------------------- 7.01. Payment of Principal, Premium and Interest................................................ 60
ii 7.02. Preservation of Partnership Existence and Franchises....................................... 60 7.03. Maintenance of Properties.................................................................. 60 7.04. Taxes...................................................................................... 60 (a) Payment of Taxes........................................................................... 60 (b) Tax Returns................................................................................ 61 7.05. Books, Records and Access.................................................................. 61 7.06. Compliance with Law........................................................................ 61 7.07. Insurance.................................................................................. 62 7.08. Offer to Repurchase upon Change of Control................................................. 62 7.09. Offer to Purchase by Application of Excess Proceeds........................................ 62 7.10. Offer to Purchase In Event of Non-Consummation of Aurora Acquisition....................... 63 7.11. Offer to Purchase In Event Banks Decline Mandatory Prepayment of Proceeds of Certain Debt Issuances.................................................................... 64 7.12. Further Assurances......................................................................... 65 ARTICLE 8 NEGATIVE COVENANTS ---------------------------- 8.01. Stay, Extension and Usury Laws............................................................. 66 8.02. Restricted Payments........................................................................ 66 8.03. Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.................. 69 8.04. Incurrence of Indebtedness................................................................. 70 8.05. Asset Sales................................................................................ 70 8.06. Transactions with Affiliates............................................................... 72 8.07. Holding Company Status..................................................................... 72 8.08. Limitation on Liens........................................................................ 73 8.09. Limitation on Issuances and Sales of Equity Interests of Restricted Subsidiaries........... 73 8.10. Payments for Consents...................................................................... 73 8.11. Merger, Consolidation, Conversion or Sale of Assets........................................ 73 8.12. Successor Company Substituted.............................................................. 74 8.13. Public Disclosures......................................................................... 74 8.14. [Reserved]................................................................................. 75 8.15. Conduct of Business........................................................................ 75 8.16. Limitation on Tax Consolidation............................................................ 75 8.17. Limitation on Designations of Unrestricted Subsidiaries.................................... 75 8.18. Limitation on Public Equity Offerings...................................................... 76 ARTICLE 9 PROVISIONS RELATING TO RESALES OF SECURITIES ------------------------------------------------------ 9.01. Private Offerings.......................................................................... 76 (a) Offers and Sales Only to Institutional Accredited Investors or Qualified Institutional Buyers....................................................................... 76 (b) No General Solicitation.................................................................... 76 (c) Purchases by Non-Bank Fiduciaries.......................................................... 76 (d) Restrictions on Transfer; Legend........................................................... 77 (e) No Future Liability........................................................................ 77 (f) Securities Act Restrictions................................................................ 77 9.02. Resale Offering Assistance................................................................. 78
iii 9.03. Blue Sky Compliance........................................................................ 80 9.04. Ratings of the Notes....................................................................... 80 9.05. Exchange and Registration Rights Agreement; Mezzanine Investors Stock Registration Rights Agreement............................................................. 80 9.06. No Integration............................................................................. 80 9.07. DTC Agreement.............................................................................. 80 9.08. Form of Legend for the Securities.......................................................... 81 ARTICLE 10 THE NOTES -------------------- 10.01. Form and Execution......................................................................... 82 10.02. Terms of the Notes......................................................................... 82 (a) Stated Maturity............................................................................ 82 (b) Interest................................................................................... 82 10.03. Denominations.............................................................................. 82 10.04. Payments and Computations.................................................................. 83 10.05. Registration; Registration of Transfer and Exchange........................................ 83 (a) Security Register.......................................................................... 83 (b) Registration of Transfer................................................................... 83 (c) Exchange................................................................................... 83 (d) Effect of Registration of Transfer or Exchange............................................. 83 (e) Requirements; Charges...................................................................... 83 (f) Certain Limitations........................................................................ 84 10.06. Mutilated, Destroyed, Lost and Stolen Notes................................................ 84 10.07. Persons Deemed Owners...................................................................... 84 10.08. Cancellation............................................................................... 85 10.09. Home Office Payment........................................................................ 85 ARTICLE 11 EVENTS OF DEFAULT ---------------------------- 11.01. Events of Default.......................................................................... 85 11.02. Remedies................................................................................... 87 11.03. Waiver of Past Defaults.................................................................... 88 ARTICLE 12 REDEMPTION --------------------- 12.01. Right of Redemption........................................................................ 88 12.02. Partial Redemptions........................................................................ 88 12.03. Mandatory Redemption....................................................................... 88 12.04. Optional Redemption........................................................................ 89 12.05. [Reserved]................................................................................. 89 12.06. Notice of Redemption....................................................................... 89 12.07. Deposit of Redemption Price................................................................ 90 12.08. Notes Payable on Redemption Date........................................................... 90 12.09. Notes Redeemed in Part..................................................................... 90
iv
ARTICLE 13 EXPENSES, INDEMNIFICATION AND CONTRIBUTION AND TERMINATION --------------------------------------------------------------------- 13.01. Expenses................................................................................... 91 13.02. Indemnification............................................................................ 91 (a) Indemnification by the Company............................................................. 91 (b) Indemnification by the Purchasers.......................................................... 92 (c) Notifications and Other Indemnification Procedures......................................... 92 13.03. Contribution............................................................................... 93 13.04. Survival................................................................................... 94 13.05. Termination................................................................................ 94 ARTICLE 14 MISCELLANEOUS ------------------------ 14.01. Notices.................................................................................... 95 14.02. Benefit of Agreement; Assignments and Participations....................................... 95 14.03. No Waiver; Remedies Cumulative............................................................. 96 14.04. Amendments, Waivers and Consents........................................................... 96 14.05. Counterparts............................................................................... 97 14.06. Reproduction............................................................................... 97 14.07. Headings................................................................................... 97 14.08. Governing Law; Submission to Jurisdiction; Venue........................................... 97 14.09. Severability............................................................................... 98 14.10. Entirety................................................................................... 99 14.11. Survival of Representations and Warranties................................................. 99 14.12. Incorporation.............................................................................. 99 EXHIBITS Exhibit A - Form of Note Exhibit B - Form of Exchange and Registration Rights Agreement Exhibit C - Form of Mezzanine Investors Stock Registration Rights Agreement Exhibit D - Form of Second Amended and Restated Securityholders Agreement Exhibit E Form of Fourth Restated Agreement of Limited Partnership Exhibit F Form of Amendment to Restated Investment Agreement Exhibit G - Form of Officers' Certificate Exhibit H - Form of Secretary's Certificate Exhibit I - Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP Exhibit J - Form of Opinion of Tim Smith, Esq., General Counsel of the Company Exhibit K - Form of Opinion of Counsel to Existing Investor SCHEDULES Schedule A - Information Relating to Purchasers
v UNITS PURCHASE AGREEMENT UNITS PURCHASE AGREEMENT, dated as of May 4, 2000, by and among NASSAU BROADCASTING PARTNERS, L.P., a Delaware limited partnership (the "Company"), ------- NASSAU FINANCE CORP., a Delaware corporation ("Nassau Finance"; and, together -------------- with the Company, the "Issuers"), MERRILL LYNCH CAPITAL CORPORATION ("Merrill ------- ------- Lynch"), CAISSE DE DEPOT ET PLACEMENT DU QUEBEC, THE BANK OF NOVA SCOTIA, OZ - ----- MASTER FUND, LTD., and BANK OF MONTREAL (each, a "Purchaser"; and, collectively, --------- the "Purchasers"). ---------- RECITALS -------- WHEREAS, upon the terms and subject to the conditions set forth in this Agreement, the Issuers have agreed to sell to the Purchasers, and each Purchaser, acting severally and not jointly, has agreed to purchase for aggregate gross proceeds of $60,000,488.85 from the Company, 117,359 units (the "Units") consisting of $117,359,000.00 aggregate principal amount at maturity of ----- the Issuers' 13% (resetting to 14%) Senior Discount Notes due 2010 (the "Notes") ----- in the form of Exhibit A hereto (as defined herein) and 19,303.86 Initial LP Units (as defined herein) representing, in the aggregate, 2.0% of the aggregate Equity Interests of the Company determined on a Fully Diluted Basis as of the Issue Date (as such terms are defined herein) (as increased by any Antidilutive Initial LP Units (as defined herein) that may be issued in the event any Incremental LP Units (as defined herein) are issued) plus such number of Incremental LP Units representing up to an additional 3.5% of the aggregate Equity Interests of the Company determined on a Fully Diluted Basis as of the Incremental LP Units Issue Date (as defined below) as may be issuable under the circumstances provided in Section 2.01(a) below; WHEREAS, concurrently with the execution of this Agreement, Nassau Broadcasting I, LLC ("Opco"), a newly formed wholly owned subsidiary of the ---- Company to which the Company will contribute all or substantially all of its assets, has entered into a credit agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as sole book-running lead arranger and syndication agent, PNC Bank, National Association, as administrative agent, The Bank of Nova Scotia, as documentation agent, and the lenders named therein (as further defined herein, the "Bank Credit Agreement"); --------------------- WHEREAS, the proceeds of the sale of the Securities together with the proceeds of borrowings under the Bank Credit Agreement, will be used to effect a recapitalization (the "Recapitalization") pursuant to which the Company will (i) ---------------- repurchase 54,111.04 outstanding units of partnership interest from Nassau Holdings, Inc., one of its existing limited partners, for a purchase price of $7.5 million payable through the Initial NH Redemption Payment and the Deferred NH Redemption Payment (as defined herein), (ii) repay all outstanding indebtedness under the Company's existing senior secured credit facility, (iii) repay the Company's outstanding subordinated notes and (iv) extinguish the preferred interests of Nassau Broadcasting Company under the Partnership Agreement; WHEREAS, the Company has entered into (i) the Aurora Acquisition Agreement (as defined herein) to acquire all of the outstanding membership interests of Aurora Communications LLC (the "Aurora Acquisition"), and (ii) the ------------------ Allentown Acquisition Agreement to acquire two radio stations located in Allentown, Pennsylvania from Clear Channel Broadcasting, Inc. (the "Allentown Acquisition" and, collectively with --------------------- the Aurora Acquisition, the "Acquisitions"); ------------ WHEREAS, the Company intends to close the Acquisitions concurrently with the closing of an initial public offering of the Company's Common Stock; WHEREAS, the holders of the Notes from time to time will be entitled to the benefits of an Exchange and Registration Rights Agreement, dated the Issue Date (the "Exchange and Registration Rights Agreement"), by and among the ------------------------------------------ Issuers and the Purchasers in the form of Exhibit C hereto; WHEREAS, the holders of LP Units from time to time will be entitled to the benefits of the Common Stock Registration Rights Agreement, dated the Issue Date (the "Mezzanine Investors Stock Registration Rights Agreement"), by and ------------------------------------------------------- among the Company, the Purchasers and certain persons that are currently the holders of Partnership Interests in the Company, in the form of Exhibit D hereto; WHEREAS, the holders of LP Units will be entitled to the benefits of (i) the Second Amended and Restated Securityholders Agreement, in the form of Exhibit E hereto, (ii) the Fourth Restated Partnership Agreement (as defined - --------- below), in the form of Exhibit F hereto, and (iii) the Amendment to Restated --------- Investment Agreement (as defined below), in the form of Exhibit G hereto; --------- WHEREAS, the Company and Nassau Finance, as applicable, have duly authorized the creation and issuance of the Units, the Notes and the LP Units and the execution and delivery of this Agreement, the Exchange and Registration Rights Agreement and the Mezzanine Investors Stock Registration Rights Agreement; and WHEREAS, all things necessary to make this Agreement, the Notes (when issued and delivered hereunder), the Exchange and Registration Rights Agreement and the Mezzanine Investors Stock Registration Rights Agreement valid and binding obligations of the Company in accordance with their respective terms have been done. NOW, THEREFORE, the parties hereto agree as follows: ARTICLE 1 --------- DEFINITIONS AND ACCOUNTING TERMS -------------------------------- 1.01. Definitions. As used herein, the following terms shall ------------------ have the meanings specified herein unless the context otherwise requires: "Accredited Investor" means any Person that is an "accredited ------------------- investor" within the meaning of Rule 501(a) under the Securities Act. 2 "Accreted Value" means, for any specified date (the "Specified -------------- --------- Date"), the amount calculated pursuant to clause (i), (ii), (iii) or (iv) below - ---- with respect to each $1,000 principal amount at Maturity of the Notes: (i) if the Specified Date occurs on one or more of the following dates (each a "Semiannual Accrual Date"), the Accreted Value ----------------------- shall equal $511.26 on the Issue Date, and for any Semiannual Accrual Date thereafter, the amount set forth below: Semiannual Accrual Date Accreted Value - ----------------------- -------------- November 1, 2000.................................... $ 543.93 May 1, 2001......................................... 582.01 November 1, 2001.................................... 622.75 May 1, 2002......................................... 666.34 November 1, 2002.................................... 712.99 May 1, 2003......................................... 762.90 November 1, 2003.................................... 816.30 May 1, 2004......................................... 873.44 November 1, 2004.................................... 934.58 May 1, 2005......................................... 1,000.00 (ii) if the Specified Date occurs before the first Semiannual Accrual Date, the Accreted Value shall equal the sum of (a) the original issue price and (b) an amount equal to the product of (1) the Accreted Value for the first Semiannual Accrual Date less the original issue price multiplied by (2) a fraction, the numerator of which is the number of days from the date of this Agreement to the specified date, using a 360-day year of twelve 30-day months, and the denominator of which is the number of days elapsed from the date of this Agreement to the first Semiannual Accrual Date, using a 360-day year of twelve 30-day months; (iii) if the Specified Date occurs between two Semiannual Accrual Dates, the Accreted Value shall equal the sum of (A) the Accreted Value for the Semiannual Accrual Date immediately preceding such Specified Date and (B) an amount equal to the product of (i) the Accreted Value for the immediately following Semiannual Accrual Date less the Accreted Value for the immediately preceding Semiannual Accrual Date, and (ii) a fraction, the numerator of which equals the number of days from the immediately preceding Semiannual Accrual Date to the Specified Date, using a 360-day year of twelve 30-day months, and the denominator of which is 180; and (iv) if the Specified Date is on or after the last Semiannual Accrual Date, the Accreted Value shall equal $1,000. "Acquired Indebtedness" means Indebtedness of a Person (a) --------------------- existing at the time such Person becomes a Restricted Subsidiary or (b) assumed in connection with the acquisition of assets from such Person, in each case, other than Indebtedness incurred in connection with, or 3 in contemplation of, such Person becoming a Subsidiary or such acquisition; provided that, for purposes of Section 8.04, such Indebtedness shall be deemed to be incurred on the date of the related acquisition of assets from any Person or the date the acquired Person becomes a Restricted Subsidiary. "Acquisitions" is defined in the fourth recital to this ------------ Agreement. "Additional Company Information" is defined in Section 9.02(e). ------------------------------ "Affiliate" means, with respect to any specified Person: (i) any --------- other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person; (ii) any other Person that owns, directly or indirectly, 10% or more of such specified Person's Equity Interests or any executive officer or director of any such specified Person or other Person or, with respect to any Existing Investor or Aurora Investor that is a natural Person, any person having a relationship with such Person by blood, marriage or adoption no more remote than first cousin; or (iii) any other Person 10% or more of the Voting Equity Interests of which is beneficially owned or held directly or indirectly by such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the ------- power to direct the management and policies of such Person, directly or indirectly, whether through ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings ----------- ---------- correlative to the foregoing. With respect to each Purchaser, an Affiliate shall also include, without limitation, any Person managed or advised by, or controlling or under common with, such Purchaser or any of its Affiliates. "Affiliate Transaction" is defined in 8.06. --------------------- "Agreement" is defined in Section 14.04. --------- "Allentown Acquisition" shall have the meaning set forth in the --------------------- fourth recital to this Agreement. "Allentown Acquisition Agreement" means the purchase agreement ------------------------------- dated as of February 29, 2000 between the Company and Clear Channel Broadcasting Inc., relating to the Allentown Acquisition as amended, supplemented or otherwise modified from time to time pursuant to the terms thereof. "Amendment to Restated Investment Agreement" means the Amendment ------------------------------------------ to Restated Investment Agreement by and among the Company and the Existing Investors to be entered into on the Issue Date, substantially in the form of Exhibit F hereto. - --------- "Antidilutive Aurora LP Investor Units" means such additional LP ------------------------------------- Units as shall be issued to the Aurora Investors in respect of their Aurora Investor LP Units to avoid any dilution from the issuance of Incremental LP Units or Antidilutive Initial LP Units to the Purchasers. "Antidilutive Initial LP Units" shall have the meaning set forth ----------------------------- in Section 2.01(a)(ii) hereof. 4 "Applicable Law" means all applicable laws, statutes, treaties, -------------- rules, codes (including building codes), ordinances, regulations, certificates, orders and licenses of, and interpretations by, any Governmental Authority and judgments, decrees, injunctions, writs, permits, orders or like governmental action of any Governmental Authority (including any Environmental Law and any laws pertaining to health or safety) applicable to the Company, any of its Subsidiaries or any of their property or operations. "Asset Acquisition" means (i) an Investment by the Company or any ----------------- Restricted Subsidiary in any other Person pursuant to which such Person will become a Restricted Subsidiary or will be merged or consolidated with or into the Company or any Restricted Subsidiary or (ii) the acquisition by the Company or any Restricted Subsidiary of the assets of any Person which constitute substantially all of the assets of such Person, or any division or line of business of such Person, or which is otherwise outside of the ordinary course of business. "Asset Sale" means any sale, issuance, conveyance, transfer, ---------- lease or other disposition (including, without limitation, by way of merger, consolidation or sale and leaseback transaction) (collectively, a "transfer"), -------- directly or indirectly, in one or a series of related transactions, of (i) any Equity Interests of any Subsidiary; (ii) all or substantially all of the properties and assets of the Company or its Subsidiaries; (iii) any FCC license for the ownership and operation of radio stations held by the Company or any Restricted Subsidiary (whether by sale of Equity Interests or otherwise); or (iv) any other properties or assets of the Company or any Subsidiary, other than in the ordinary course of business. For the purposes of this definition, the term "Asset Sale" shall not include any transfer of properties or assets (A) that is governed by the provisions of Section 8.11, (B) of the Company to any Restricted Subsidiary, or of any Restricted Subsidiary to the Company or any Restricted Subsidiary in accordance with the terms of this Agreement, (C) consisting of damaged, worn-out or other obsolete property disposed of in the ordinary course of business or (D) for fair market value so long as the fair market value of the consideration received from all such transfers under this clause (D) since the Issue Date does not exceed $1.0 million. "Audit Date" means December 31, 1999. ---------- "Aurora Acquisition" shall have the meaning set forth in the ------------------ fourth recital to this Agreement. "Aurora Acquisition Agreement" means the Purchase and Exchange ---------------------------- Agreement dated as of March 24, 2000 between the Company and the sellers named therein with respect to the Aurora Acquisition, as amended by Amendment No. 1 to Purchase and Exchange Agreement dated as of the date hereof, and as further amended, supplemented, or otherwise modified from time to time pursuant to the terms thereof. "Aurora Debt" means the $65.0 million in debt to be refinanced in ----------- connection with the Aurora Acquisition. "Aurora Debt Repayment" shall mean the repayment of the Aurora --------------------- Debt. "Aurora Investor LP Units" means the Equity Interests in the ------------------------ Company issued to the Aurora Investors upon the consummation of the Aurora Acquisition. 5 "Aurora Investors" means the parties, including BACI, that have ---------------- agreed pursuant to the Aurora Acquisition Agreement to acquire Equity Interests in the Company. "Aurora Offer to Purchase" has the meaning set forth in Section ------------------------ 7.10 "Average Life" means, as of the date of determination with ------------ respect to any Indebtedness, the quotient obtained by dividing (a) the sum of the products of (i) the number of years from the date of determination to the date or dates of each successive scheduled principal payment (including, without limitation, any sinking fund requirements) of such Indebtedness multiplied by (ii) the amount of each such principal payment by (b) the sum of all such principal payments. "BACI" means Banc America Capital Investors SBIC I, L.P., a ---- Delaware limited partnership, and its successors in interest. "Bank Credit Agreement" means the Credit Agreement dated the date --------------------- hereof among Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as sole book-running lead arranger and syndication agent, PNC Bank, National Association, as administrative agent, The Bank of Nova Scotia, as documentation agent, the lenders party thereto, Nassau Broadcasting Partners I, LLC, as borrower, and the guarantors party thereto, as in effect on the date hereof and as such agreement may be amended, renewed, extended, substituted, refinanced, restructured, replaced, supplemented or otherwise modified from time to time, whether under one or more credit facilities (including, without limitation, any successive renewals, extensions, substitutions, refinancings, restructurings, replacements, supplementations or other modifications of the foregoing). "Bankruptcy Law" means Title 11 of the United States Code, as -------------- amended, or any similar United States federal or state law relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or relief of debtors or any amendment to, succession to or change in any such law. "Board of Directors" means, prior to the Reorganization, the ------------------ Board of Directors of the General Partner, and after the Reorganization, the Board of Directors (or equivalent management body) of the Company or the Board of Directors or similar governing body of a Restricted Subsidiary, as the case may be, or any authorized committee of such Board of Directors. "Business Day" means any day other than a Legal Holiday. ------------ "Capitalized Lease Obligation" means any obligation under a lease ---------------------------- of (or other agreement conveying the right to use) any property (whether real, personal or mixed) that is required to be classified and accounted for as a capital lease obligation under GAAP, and, for the purpose of this Agreement, the amount of such obligation at any date shall be the capitalized amount thereof at such date, determined in accordance with GAAP. "Cash Equivalents" shall mean, for any Person: (i) direct ---------------- obligations of the United States of America, or of any agency thereof, or obligations guaranteed as to principal and interest by the United States of America, or by any agency thereof, in either case maturing not 6 more than one year from the date of acquisition thereof by such Person; (ii) time deposits, certificates of deposit or bankers' acceptances (including eurodollar deposits) issued by any bank or trust company organized under the laws of the United States of America or any state thereof and having capital, surplus and undivided profits of at least $500.0 million and a deposit rating of investment grade; (iii) paper rated A-1 or better by Standard & Poor's Corporation or P-1 or better by Moody's Investors Service, Inc., respectively, maturing not more than 180 days from the date of acquisition thereof by such Person; (iv) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (i) above entered into with a bank meeting the qualifications described in clause (ii) above; (v) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least A by Standard & Poor's Corporation or A by Moody's Investors Service, Inc; or (vi) money market mutual funds that invest primarily in the foregoing items. "CERCLA" means the Comprehensive Environmental Response, ------ Compensation and Liability Act of 1980, as amended from time to time, 42 U.S.C. (S) 9601 et seq. "Change in Control Offer" is defined in Section 7.08(a). ----------------------- "Change in Control Purchase Date" is defined in Section 7.08(a). ------------------------------- "Change in Control Purchase Price" is defined in Section 7.08(a). -------------------------------- "Change of Control" means the occurrence, after the date of the ----------------- Recapitalization, of any of the following events: (a) any "person" or "group" ------ ----- (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than Permitted Holders, is or becomes the "beneficial owner" (as defined in ---------------- Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have "beneficial ownership" of all securities that such Person has the -------------------- right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 35% of the total outstanding Equity Interests (prior to the Reorganization) or Voting Equity Interests (after the Reorganization) of the Company, and the Permitted Holders beneficially own, directly or indirectly, a lesser percentage of the Equity Interests (prior to the Reorganization) or voting power of the Voting Equity Interests (after the Reorganization) of the Company, voting together as a single class, than such person or group; (b) the Company consolidates with, or merges with or into, or converts into another Person (other than as a result of the Reorganization) or conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any Person, or any Person consolidates with or merges with or into the Company, in any such event pursuant to a transaction in which the outstanding Equity Interests (prior to the Reorganization) or Voting Equity Interests (after the Reorganization) of the Company are converted into or exchanged for cash, securities or other property, other than any such transaction (i) where the outstanding Equity Interests (prior to the Reorganization) or Voting Equity Interests (after the Reorganization) of the Company are not converted or exchanged at all (except to the extent necessary to reflect a change in the jurisdiction of incorporation of the Company) or are converted into or exchanged for (A) Voting Equity Interests (other than Redeemable Equity Interests) of the surviving or transferee Person or (B) Voting Equity Interests (other than Redeemable Equity Interests) of the surviving or 7 transferee Person and cash, securities and other property in an amount that could be paid by the Company as a Restricted Payment as described under Section 1009 and (ii) immediately after such transaction, no "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than Permitted Holders, is the "beneficial owner" (as defined in Rules 13d-3 and 13d- 5 under the Exchange Act, except that a Person shall be deemed to have "beneficial ownership" of all securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 35% of the total outstanding Voting Equity Interests of the surviving or transferee corporation; (c) during any consecutive two-year period, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose election to such Board of Directors, or whose nomination for election by the shareholders of the Company, was approved by a vote of 66?% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office; provided that until such time as the Reorganization has occurred, this clause (c) shall be applicable solely to the Board of Directors of the General Partner; or (d) the Company is liquidated or dissolved or a special resolution is passed by the partners or shareholders of the Company approving the plan of liquidation or dissolution other than in a transaction which complies with the provisions of Sections 8.10 and 8.11. "Closing Time" is defined in Section 2.03. ------------ "Code" means the Internal Revenue Code of 1986, as amended from ---- time to time, and the rules and regulations promulgated thereunder, as amended from time to time. "Commission" means the Securities and Exchange Commission, as ---------- from time to time constituted, created under the Exchange Act or, if at any time after the execution of this Agreement such Commission is not existing and performing the duties now assigned to it under the Exchange Act, the body performing such duties at such time. "Common Equity Interests" means (i) with respect to a Person ----------------------- which is a corporation, any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or nonvoting) of, such Person's common stock and includes, without limitation, all series and classes of such common stock and (ii) with respect to a Person which is not a corporation, Equity Interests which have characteristics similar in all material respects to those of common stock of a corporation. "Common Stock" means the Company's common stock authorized in ------------ connection with the Reorganization and any other class or series of common equity equivalent shares of the Company hereafter created. "Communications Act" shall mean the United States Communications ------------------ Act of 1934, and any similar or successor federal statue, and the rules and regulations of the FCC thereunder, all as amended and as the same may be in effect from time to time. 8 "Company" shall have the meaning assigned in the preamble to this ------- Agreement until a successor Person shall have become such pursuant to the applicable provisions of this Agreement, and thereafter "Company" shall mean ------- such successor Person. "Company Financial Statements" is defined in Section 4.06. ---------------------------- "Company Indemnified Person" is defined in Section 13.02(b). -------------------------- "Company Stations" means the stations listed on Schedule 4.27(a). ---------------- "Consolidated" or "consolidated" (including the correlative term ------------ ------------ "consolidating") or on a "consolidated basis", when used with reference to any - -------------- financial term in this Agreement (but not when used with respect to any Tax Return or tax liability), means the aggregate for two or more Persons of the amounts signified by such term for all such Persons, with intercompany items eliminated and, with respect to net income or earnings, after eliminating the portion of net income or earnings properly attributable to minority interests, if any, in the Equity Interests of any such Person or attributable to shares of preferred stock of any such Person not owned by any other such Person, in accordance with GAAP. "Consolidated Adjusted Net Income" means, for any period, the -------------------------------- consolidated net income (or loss) of the Company and all Restricted Subsidiaries for such period as determined in accordance with GAAP, adjusted by excluding, without duplication, (a) any net after-tax extraordinary gains or losses (less all fees and expenses relating thereto), (b) any net after-tax gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions other than in the ordinary course of business, (c) the portion of net income (or loss) of any Person (other than the Company or a Restricted Subsidiary), including Unrestricted Subsidiaries, in which the Company or any Restricted Subsidiary has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or any Restricted Subsidiary in cash dividends or distributions during such period, (d) net income (but not loss) of any Person combined with the Company or any Restricted Subsidiary on a "pooling of interests" basis attributable to any period prior to the date of combination, (e) the net income of any Restricted Subsidiary (other than in the case of an incurrence of the Indebtedness pursuant to Section 8.04(a) by such Restricted Subsidiary), to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary is not at the date of determination permitted, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary or its shareholders and (f) any gain or loss, net of taxes, realized upon the termination of any employee benefit plan. "Consolidated EBITDA" means, for any period, (i) the sum of, ------------------- without duplication, the amounts for such period, taken as a single accounting period, of (a) Consolidated Adjusted Net Income, (b) to the extent reducing Consolidated Adjusted Net Income, Consolidated Non-Cash Charges, (c) to the extent reducing Consolidated Adjusted Net Income, Consolidated Tax Expense and (d) to the extent reducing Consolidated Adjusted Net Income, Consolidated Interest Expense, less (ii) other non-cash items increasing Consolidated Adjusted Net Income for such period and (iii) (for purposes of Incurrences of Indebtedness by Opco or any other Restricted Subsidiary of the Company) cash dividends or other distributions paid by Opco 9 to the Company pursuant to Section 9.10(b)(i) of the Bank Credit Agreement. For purposes of this definition, "Consolidated EBITDA" will be calculated, without duplication, after giving effect on a pro forma basis for the period of such calculation to an adjustment to eliminate or include, as applicable, the Consolidated EBITDA of the Company directly attributable to assets which are the subject of any Asset Sale or Asset Acquisition (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of the Company or one of the Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring Acquired Indebtedness) occurring during the Four Quarter Period, as if such Asset Sale or Asset Acquisition occurred on the first day of the Four Quarter Period. In calculating Consolidated EBITDA on or prior to March 31, 2001, such calculation shall be made with adjustments for cost savings relating to the Allentown Acquisition and the Aurora Acquisition, substantially consistent with the calculation of Consolidated EBITDA made in connection with satisfying the condition set forth in Section 7.01(xii) of the Bank Credit Agreement, such adjustment not to exceed (1) $700,000 for the Four Quarter Period ended June 30, 2000, (2) $525,000 for the Four Quarter Period ended September 30, 2000, (3) $350,000 for the Four Quarter Period ended December 31, 2000, and (4) $175,000 for the Four Quarter Period ended March 31, 2001. "Consolidated Interest Expense" means, for any period, without ----------------------------- duplication, the sum of (a) the interest expense of the Company and its Restricted Subsidiaries for such period, including, without limitation, (i) amortization of debt discount, (ii) the net cost of Interest Rate Agreements (including amortization of discounts), (iii) the interest portion of any deferred payment obligation, (iv) accrued interest, (v) the consolidated amount of any interest capitalized by the Company and (vi) amortization of debt issuance costs, plus (b) the interest component of Capitalized Lease Obligations of the Company and its Restricted Subsidiaries paid, accrued and/or scheduled to be paid or accrued during such period, excluding, however, any amount of such interest of any Restricted Subsidiary if the net income of such Restricted Subsidiary is excluded in the calculation of Consolidated Adjusted Net Income pursuant to clause (e) of the definition thereof (but only in the same proportion as the net income of such Restricted Subsidiary is excluded from the calculation of Consolidated Adjusted Net Income pursuant to clause (e) of the definition thereof); provided that the Consolidated Interest Expense attributable to interest on any Indebtedness computed on a pro forma basis and (A) bearing a floating interest rate shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period and (B) which was not outstanding during the period for which the computation is being made but which bears, at the option of the Company, a fixed or floating rate of interest, shall be computed by applying, at the option of the Company, either the fixed or the floating rate. "Consolidated Leverage Ratio" means, at any date of --------------------------- determination, the ratio of (a) the sum of (i) the aggregate amount of Indebtedness of the Company and its Restricted Subsidiaries outstanding at the date of determination that would be required to be reflected on a balance sheet prepared as of such date on a consolidated basis in accordance with GAAP plus (ii) the aggregate principal amount of Indebtedness of the Company and the Restricted Subsidiaries outstanding as of such date that is not required to be reflected on a balance sheet in accordance with GAAP, determined on a consolidated basis, to (b) the aggregate amount of Consolidated EBITDA for the then most recent four full fiscal quarters for which consolidated financial statements of the Company are available preceding the date of the transaction giving rise to the 10 need to calculate the Consolidated Leverage Ratio (such four fiscal quarter period being referred to as the "Four Quarter Period"). ------------------- "Consolidated Non-Cash Charges" means, for any period, the ----------------------------- aggregate depreciation, amortization and other non-cash expenses of the Company and the Restricted Subsidiaries reducing Consolidated Adjusted Net Income of the Company for such period (other than any non-cash item requiring an accrual or reserve for cash disbursements in any future period), determined on a consolidated basis in accordance with GAAP. "Consolidated Tax Expense" means, for any period, the provision ------------------------ for federal, state, provincial, local and foreign income taxes of the Company and all Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP. "Contract" is defined in Section 4.05. -------- "Controlling Person" is defined in Section 13.02(a). ------------------ "Currency Agreements" means any spot or forward foreign exchange ------------------- agreements and currency swap, currency option or other similar financial agreements or arrangements entered into by the Company or any of its Restricted Subsidiaries designed solely to protect against or manage exposure to fluctuations in currency exchange rates. "Current Market Value" per share or unit of Equity Interest of -------------------- the Company at any date means (i) prior to the IPO, the valuation per share or unit of Equity Interest of the Company agreed upon by the Company and the Aurora Investors under the Aurora Acquisition Agreement in connection with the issuance of Equity Interests of the Company to the Aurora Investors, and (ii) from and after an IPO, the market price of the Common Stock for the trading day immediately preceding such date, as certified to the Holders by the President, any Vice President or the Chief Financial Officer of the Company (or, prior to the Reorganization, the General Partner). The market price for such trading day shall be: (A) in the case of a security listed or admitted to trading on any US national securities exchange or quotation system, the closing sales price, regular way, on such day, or if no sale takes place on such day, the average of the closing bid and asked prices on such day, (B) in the case of a security not then listed or admitted to trading on any US national securities exchange or quotation system, the last reported sale price on such day, or if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reputable quotation source designated by the Company, and (C) in the case of a security not then listed or admitted to trading on any US national securities exchange or quotation system and as to which no such reported sale price or bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reputable quotation service, or a newspaper of general circulation in the Borough of Manhattan, City and State of New York customarily published on each Business Day, designated by the Company, or, if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than 30 days prior to the date in question) for which prices have been so reported. "Default" means any event, act or condition that is, or with the ------- giving of notice, lapse of time or both would constitute an Event of Default. 11 "Default Amount" is defined in Section 11.02. -------------- "Deferred NH Redemption Payment" means the payment by the Company ------------------------------ to Nassau Holdings, Inc., as limited partner, after the Issue Date of $5.0 million in respect of the balance payable in respect of the Total NH Redemption Payment after giving effect to payment of the Initial NH Redemption Payment, plus interest accrued at the rate earned by the Company on Permitted Investments in the form of Cash Equivalents, in respect of the redemption on the Issue Date of 54,111.04 units of Partnership Interest held by Nassau Holdings, Inc. "Demand Registration Statement" is defined in the Exchange and ----------------------------- Registration Rights Agreement. "Depositary" is defined in Section 9.07. ---------- "Designation" is defined in Section 8.17(a). ----------- "Designation Amount" is defined in Section 8.17(a). ------------------ "Disclosure Schedule" means all numbered Schedules to this ------------------- Agreement. "Disinterested Director" means, with respect to any transaction ---------------------- or series of related transactions, a member of the Board of Directors of the Company who does not have any material direct or indirect financial interest in or with respect to such transaction or series of related transactions. "Enforceability Exceptions" means, with respect to any specified ------------------------- obligation, any limitations on the enforceability of such obligation due to bankruptcy, insolvency, reorganization, moratorium, and other similar laws of general applicability relating to or affecting creditors' rights or general equity principles (other than, in any such case, any Federal or state laws relating to fraudulent transfers) and, in the case of any indemnity for securities law obligations, to the extent such indemnity may not be enforceable due to public policy considerations. "Environmental Claim" shall mean, with respect to any Person, any ------------------- written notice, claim, demand or other communication (collectively, a "claim") ----- by any other Person alleging such Person's liability for any costs, cleanup costs, response or corrective action costs, damages to natural resources or other Property, personal injuries, fines or penalties arising out of or resulting from (i) the presence, release or threatened release into the environment, or any Hazardous Material at any location, whether or not owned by such Person, or (ii) any violation of any Environmental Law. The term "Environmental Claim" shall include any claim by any Person seeking damages, ------------------- contribution, indemnification, cost recovery, compensation or injunctive relief resulting from the presence of Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment. "Environmental Laws" shall mean any and all applicable laws, ------------------ rules or regulations of any Governmental Authority, any orders, decrees, judgments or injunctions and the common law in each case as now or hereafter in effect, relating to pollution or protection of human health, safety or the environment, including, without limitation, ambient air, indoor air, 12 soil, or surface water, ground water, land or subsurface strata, and natural resources such as wetlands, flora or fauna, including, without limitation, those relating to releases or threatened releases of Hazardous Materials into the environment, or otherwise relating to the manufacture, processing, generation, distribution, use, treatment, storage, discharge, disposal, collection, transfer, transport or handling of Hazardous Materials. "Equity Interest" in any Person means any and all shares, --------------- interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) corporate stock or other equity participations, including partnership interests, whether general or limited, in such Person. Without limiting the generality of the foregoing, before the Reorganization, "Equity Interests" of the Company shall include the Partnership Interests, and after the Reorganization, the Common Stock. "Equity Investee" is defined in Section 4.03. --------------- "ERISA" shall mean the United States Employee Retirement Income ----- Security Act of 1974, as amended. "ERISA Entity" shall mean any member of an ERISA Group. ------------ "ERISA Event" shall mean (a) any "reportable event," as defined ----------- in Section 4043 of ERISA or the regulations issued thereunder with respect to a Pension Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Pension Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived, the failure to make by its due date a required installment under Section 412(m) of the Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Pension Plan; (d) the incurrence by any ERISA Entity of any liability under Title IV of ERISA with respect to the termination of any Pension Plan; (e) the receipt by any ERISA Entity from the Pension Benefit Guaranty Corporation (the "PBGC") or a plan administrator of any notice relating to an intention to ---- terminate any Pension Plan or to appoint a trustee to administer any Pension Plan, or the occurrence of any event or condition which could reasonably be expected to constitute grounds under ERISA for the termination of or the appointment of a trustee to administer, any Pension Plan; (f) the incurrence by any ERISA Entity of any liability with respect to the withdrawal or partial withdrawal from any Pension Plan or Multiemployer Plan; (g) the receipt by an ERISA Entity of any notice, or the receipt by any Multiemployer Plan from any ERISA Entity of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA; (h) the making of any amendment to any Pension Plan which could result in the imposition of a lien or the posting of a bond or other security; or (i) the occurrence of a nonexempt prohibited transaction (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could result in liability to the Company or any of its Subsidiaries. "ERISA Group" means the Company and all members of a controlled ----------- group of corporations and all trades or businesses (whether or not incorporated) under common control 13 which, together with the Company or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code. "Event of Default" is defined in Section 11.01. ---------------- "Excess Debt Issuance Proceeds" means Net Cash Proceeds of a Qualified ----------------------------- Debt Issuance as to which the Lenders have exercised their election under Section 2.11 of the Bank Credit Agreement not to require the application of such proceeds to the prepayment of loans or reduction of commitments under the Bank Credit Agreement. "Excess Debt Issuance Proceeds Offer Price" shall have the meaning set ----------------------------------------- forth at Section 7.11(a) hereof. "Excess Debt Issuance Proceeds Offer to Purchase" shall have the ----------------------------------------------- meaning set forth at Section 7.11(a) hereof. "Excess Debt Issuance Proceeds Purchase Date" shall have the meaning ------------------------------------------- set forth at Section 7.11(b) hereof. "Excess Proceeds" is defined in Section 8.05(b). --------------- "Excess Proceeds Offer" is defined in Section 8.05(c). --------------------- "Excess Proceeds Offer Price" is defined in Section 8.05(c). --------------------------- "Exchange Act" means the Securities Exchange Act of 1934, as amended, ------------ and the rules and regulations promulgated by the Commission thereunder. "Exchange and Registration Rights Agreement" is defined in the seventh ------------------------------------------ recital to this Agreement. "Exchange Notes" means the notes issued in the Exchange Offer. -------------- "Exchange Offer" is defined in the Exchange and Registration Rights -------------- Agreement. "Exchange Offer Registration Statement" is defined in the Exchange and ------------------------------------- Registration Rights Agreement. "Exchange Shares" means the shares of Common Stock of the Company for --------------- which the Initial LP Units and any Incremental LP Units shall be exchangeable upon the Reorganization. "Existing Credit Facilities" shall mean the Loan Agreement dated as of -------------------------- August 28, 1998 among the Company, Amresco Commercial Finance, Inc., as Agent, and the other financial institutions party thereto (as amended through the date hereof). "Existing Credit Facilities Repayment" shall mean the repayment of all ------------------------------------ Indebtedness and cancellation of all commitments to make extensions of credit under the Existing Credit Facilities. 14 "Existing Investors" means the General Partner, the Existing Limited ------------------ Partners, Nassau Broadcasting Holdings, Inc., Mercatanti, Louis F. Mercatanti, Jr., as Executor of the estate of Louis F. Mercatanti, Sr., Spectrum, TD, Grotech and Rahn. "Existing Limited Partners" means Nassau Broadcasting Company, Inc. ------------------------- and Nassau Holdings, Inc. "Existing Notes" means the subordinated notes issued by the Company -------------- and the General Partner in favor of Spectrum, Grotech, Rahn and TD. "Existing Notes Repayment" means the repayment of all Indebtedness of ------------------------ the Company and the General Partner under the Existing Notes. "Existing Subsidiaries" means Opco, LicensCo, and Nassau Finance. --------------------- "Fair Market Value" means, with respect to any asset or property, the ----------------- price which could be negotiated in an arm's-length free market transaction, for cash, between an informed and willing seller under no compulsion to sell and an informed and willing buyer neither of which is under pressure or compulsion to complete the transaction. Fair market value shall be determined by the Board of Directors of the Company or the applicable Restricted Subsidiary of the Company acting in good faith evidenced by a board resolution thereof delivered to the Noteholders. "FCC" shall mean the United Stated Federal Communications Commission --- or any other similar or successor agency of the federal government administering the Communication Act. "FCC Authorizations" shall mean the licenses, construction permits, or ------------------ other authorizations issued by the FCC necessary for the ownership and/or operations of the Radio Stations as currently conducted. "Final Maturity Date" shall mean May 1, 2010. ------------------- "First Contingent Payment" has the meaning set forth in the ------------------------ Partnership Agreement. "Foreign Plan" shall mean any employee benefit plan, program, policy, ------------ arrangement or agreement maintained or contributed to by, or entered into with, any Company with respect to employees employed outside the United States. "Fourth Restated Partnership Agreement" means the Fourth Restated ------------------------------------- Agreement of Limited Partnership to be entered into among the General Partner, the Existing Limited Partners and the Purchasers at the Issue Date, substantially in the form of Exhibit E attached hereto. --------- "Fully Diluted Basis" means, with respect to Equity Interests of the ------------------- Company, as of a particular time, the total outstanding Equity Interests of the Company as of such time, determined by treating all outstanding options (including options under the Option Agreement), 15 warrants and other rights for the purchase or other acquisition of Equity Interests (whether or not then vested or exercisable) as having been exercised and by treating all outstanding securities directly or indirectly convertible into or exchangeable for Equity Interests of the Company (whether or not then exercisable or convertible) as having been so converted or exchanged and by measuring Equity Interests consisting of partnership interests without regard to capital accounts with respect thereto. "GAAP" means, at any date of determination, generally accepted ---- accounting principles in effect in the United States which are applicable at the date of determination and which are consistently applied for all applicable periods. "General Partner" shall mean Nassau Broadcasting Partners, Inc. or any --------------- successor in interest in its capacity as general partner of the Company for so long as the Company is a Delaware limited partnership. "Governmental Authority" means (a) the government of the United States ---------------------- or any State or other political subdivision thereof, (b) any government or political subdivision of any other jurisdiction in which the Company or any Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company or any Subsidiary, or (c) any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any such government. "Grotech" means Grotech Partners IV, L.P. ------- "guarantee" means, as applied to any obligation, (i) a guarantee --------- (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner, of any part or all of such obligation and (ii) an agreement, direct or indirect, contingent or otherwise, the practical effect of which is to assure in any way the payment or performance (or payment of damages in the event of non-performance) of all or any part of such obligation, including, without limiting the foregoing, the payment of amounts drawn down by letters of credit. A guarantee shall include, without limitation, any agreement to maintain or preserve any other Person's financial condition or to cause any other Person to achieve certain levels of operating results. "Hazardous Materials" shall mean any pollutant, contaminant, toxic, ------------------- hazardous or extremely hazardous substance, constituent or waste, or any other constituent, waste, material, compound or substance subject to regulation under any Environmental Law including, without limitation, petroleum or any petroleum product, including crude oil or any fraction thereof, polychlorinated biphenyls, urea-formaldehyde insulation and friable asbestos. "Holder" means any Noteholder or any Shareholder. ------ "Incremental LP Units" has the meaning specified in Section 2.01 -------------------- hereof. "Incremental LP Units Issue Date" means the 180/th/ day after the ------------------------------- Issue Date or such earlier date at which, as the context requires, either (x) the Aurora Offer to Purchase is consummated or (y) Spectrum consummates the Spectrum Equity Investment in connection with the closing of the Aurora Acquisition. 16 "incur" is defined in Section 8.04. ----- "Indebtedness" means, with respect to any Person, without duplication, ------------ (a) all liabilities, contingent or otherwise, of such Person: (i) for borrowed money (including overdrafts), (ii) in connection with any letters of credit and acceptances issued under letter of credit facilities, acceptance facilities or other similar facilities, (iii) evidenced by bonds, notes, debentures or other similar instruments, (iv) for the deferred purchase price of property or services or created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person, or (v) for Capitalized Lease Obligations; (b) all obligations of such Person under or in respect of Interest Rate Agreements or Currency Agreements; (c) all indebtedness referred to in (but not excluded from) the preceding clauses of other Persons and all dividends of other Persons, the payment of which is secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or with respect to property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness (the amount of such obligation being deemed to be the lesser of the value of such property or asset or the amount of the obligation so secured); (d) all guarantees by such Person of Indebtedness referred to in this definition of any other Person; and (e) all Redeemable Equity Interests of such Person valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends. The amount of Indebtedness of any Person at any date shall be the outstanding principal balance at such date (or, in the case of a revolving credit or other similar facility, the total amount of funds outstanding and/or available for borrowing on the date of determination) of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation; provided that the amount outstanding at any time of any Indebtedness issued with original issue discount shall equal the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount with respect to such Indebtedness at such time as determined in conformity with GAAP. For purposes hereof, the "maximum fixed repurchase price" of any Redeemable Equity Interests which do not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Equity Interests as if such Redeemable Equity Interests were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Agreement, and if such price is based upon, or measured by, the fair market value of such Redeemable Equity Interests, such fair market value shall be determined in good faith by the board of directors of the Person that issued such Redeemable Equity Interests. Notwithstanding the foregoing, trade accounts and accrued liabilities arising in the ordinary course of business and any liability for federal, state or local taxes or other taxes owed by such Person shall not be considered Indebtedness for purposes of this definition. "Indemnified Person" is defined in Section 13.02(c). ------------------ "Indenture" is defined in the Exchange and Registration Rights --------- Agreement. "Independent Financial Advisor" means an investment banking firm of ----------------------------- national standing in the United States which, in the good-faith judgment of the Board of Directors of the Company, is independent with respect to the Company and its Affiliates and qualified to perform the task for which it is to be engaged. 17 "Initial LP Units" has the meaning specified in Section 2.01 hereof. ---------------- "Initial NH Redemption Payment" means the payment by the Company to ----------------------------- Nassau Holdings Inc., as limited partner of the Company, on the Issue Date of the first $2.5 million of the Total NH Redemption Payment in respect of the redemption on the Issue Date of 54,111.04 Units of Partnership Interest held by Nassau Holdings, Inc. "Institutional Accredited Investors" is defined in Section 9.01(a). ---------------------------------- "Intellectual Property" means (a) all inventions and discoveries --------------------- (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications and patent disclosures, together with all reissuances, continuations, continuations-in- part, revisions, extensions and re-examinations thereof, (b) all trademarks, service marks, trade dress, logos, trade names and corporate names, together with all translations, adaptations, derivations and combinations thereof and including all goodwill associated therewith, (c) all copyrightable works, all copyrights and all applications, registrations and renewals in connection therewith, (d) all broadcast rights, (e) all mask works and all applications, registrations and renewals in connection therewith, (f) all know-how, trade secrets and confidential business information, whether patentable or unpatentable and whether or not reduced to practice (including ideas, research and development, know-how, formulas, compositions and manufacturing and production process and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information and business and marketing plans and proposals), (g) all computer software (including data and related documentation), (h) all other proprietary rights, (i) all copies and tangible embodiments thereof (in whatever form or medium) and (j) all licenses and agreements in connection therewith. "Interest Payment Date" is defined in Exhibit A. --------------------- --------- "Interest Rate Agreements" means any interest rate protection ------------------------ agreements and other types of interest rate hedging agreements or arrangements (including, without limitation, interest rate swaps, caps, floors, collars and other similar agreements) designed solely to protect the Company or any Restricted Subsidiary against fluctuations in interest rates in respect of Indebtedness of the Company or any Restricted Subsidiary. "Investment" means, with respect to any Person, any direct or indirect ---------- advance, loan or other extension of credit or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase, acquisition or ownership by such Person of any Equity Interests, bonds, notes, debentures or other securities or evidences of Indebtedness issued or owned by, any other Person and all other items that would be classified as investments on a balance sheet prepared in accordance with GAAP. In addition, the fair market value of the net assets of any Subsidiary at the time that such Subsidiary is designated an Unrestricted Subsidiary shall be deemed to be an "Investment" made by the Company in such Unrestricted Subsidiary at such time. "Investments" shall ----------- exclude extensions of trade credit on commercially reasonable terms in accordance with normal trade practices. 18 "Investors" means Spectrum, TD, Grotech and Rahn and their respective --------- Affiliates. "IPO" means an initial Public Equity Offering of the Company's Equity --- Interests. "IPO Proceeds" means the net proceeds of any IPO. ------------ "Issue Date" means the original date of issue of the Units. ---------- "Issuers" is defined in the preamble. ------- "Legal Holiday" means a Saturday, a Sunday or a day on which banking ------------- institutions in The City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If any payment date in respect of the Notes is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. "Lenders" means the lenders from time to time under the Bank Credit ------- Agreement. "LicensCo" means Nassau Broadcasting II, LLC, a Delaware limited -------- liability company. "Lien" means any mortgage, charge, pledge, lien (statutory or ---- otherwise), privilege, security interest, hypothecation, assignment for security, claim, or preference or priority or other encumbrance upon or with respect to any property of any kind, real or personal, movable or immovable, now owned or hereafter acquired. A Person shall be deemed to own subject to a Lien any property which such Person has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement. "LMA Documents" shall mean the agreements listed on Schedule 1.01. ------------- "LMA Licensees" shall mean (i) Manahawkin Communications Corporation- ------------- WCHR(FM); (ii) Port Jervis Broadcasting Company, Inc.-WDLC(AM) and WTSX(FM); (iii) North Shore Broadcasting Corporation and Seashore Broadcasting Corporation-WOBM(AM) and WOBM-FM; (iv) Multicultural Radio Broadcasting, Inc.- WJHR(AM); and (v) Multicultural Radio Broadcasting, Inc.-WSBG(FM) and WVPO(AM). "LMA Option" shall mean Borrower's rights under the LMA Documents to ---------- acquire the assets described therein. "LMA Stations" shall mean (i) WCHR-FM, Trenton, NJ; (ii) WDLC(AM), ------------ Port Jervis, NY; (iii) WTSX(FM), Port Jervis, NY; (iv) WOBM(AM), Lakewood Township, NJ; (v) WOBM-FM, Toms River, NJ; (vi) WJHR(AM), Flemington, NJ; (vii) WSBG(FM), Stroudsburg, PA; and (viii) WVPO(AM), Stroudsburg, PA. "LP Units" shall mean Units as defined in the Fourth Restated -------- Partnership Agreement. 19 "Material Adverse Effect" means a material adverse effect on (a) the ----------------------- business, management, operations, condition (financial or otherwise), assets or prospects of the Company and its Subsidiaries taken as a whole, (b) the ability of the Company or any Subsidiary to perform any of its material obligations under any of the Transaction Documents, or (c) the validity or enforceability of any Transaction Document. "Material Contracts" means any agreements, contracts or arrangements ------------------ between the Company or its Subsidiaries, on the one hand, and any third parties, on the other, that are material to the business, management, operations, affairs, condition (financial or otherwise), properties, assets, prospects or results of operations of the Company and its Subsidiaries, taken as a whole. "Maturity" means, when used with respect to any Note, the date on -------- which the principal of such Note becomes due and payable as therein or herein provided, whether at the Stated Maturity with respect to such principal or by declaration of acceleration, call for redemption or otherwise (including in connection with any offer to purchase that this Agreement requires the Company to make). "Mercatanti" means Louis F. Mercatanti, Jr., an individual. ---------- "Mezzanine Investors Stock Registration Rights Agreement" has the ------------------------------------------------------- meaning specified in the eighth recital to this Agreement. "Moody's" means Moody's Investors Service, Inc. and its successors. ------- "Multiemployer Plan" shall mean a multiemployer plan within the ------------------ meaning of Section 4001(a)(3) of ERISA (i) to which any ERISA Entity is then making or accruing an obligation to make contributions, (ii) to which any ERISA Entity has within the preceding five plan years made contributions, including any Person which ceased to be an ERISA Entity during such five year period, or (iii) with respect to which the Company or any of its Subsidiaries could incur liability. "Nassau Finance" means Nassau Finance Corp., a Delaware corporation -------------- and wholly owned subsidiary of the Company. "Net Cash Proceeds" means (a) with respect to any Asset Sale, the ----------------- proceeds thereof in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of, or stock or other assets when disposed for, cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary), net of (i) brokerage commissions and other fees and expenses (including fees and expenses of legal counsel and investment banks) related to such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset Sale, (iii) payments made to retire Indebtedness where payment of such Indebtedness is secured by the assets or properties which are the subject of such Asset Sale, (iv) amounts required to be paid to any Person (other than the Company or any Restricted Subsidiary) owning a beneficial interest in the assets subject to the Asset Sale and (v) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve required in accordance with GAAP against any liabilities associated with such Asset Sale and retained by the Company or any 20 Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as reflected in an officers' certificate delivered to the Holders and (b) with respect to any capital contribution in respect of, or any issuance or sale of, Equity Interests, or debt securities or Redeemable Equity Interests that have been converted into or exchanged for Qualified Equity Interests, as referred to under Section 8.02, the proceeds of such capital contribution or issuance or sale in the form of cash or Cash Equivalents, including payments in respect of deferred payment obligations when received in the form of, or stock or other assets when disposed for, cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Subsidiary of the Company), net of attorney's fees, accountant's fees and brokerage, consultation, underwriting and other fees and expenses, as applicable, actually incurred in connection with such capital contribution or issuance or sale and net of taxes paid or payable as a result thereof. "Noteholder" means a Person in whose name a Note is registered on the ---------- Security Register. "Notes" means the 13% (resetting to 14%) Senior Discount Notes due ----- 2010 that are issued under this Agreement, as amended or supplemented from time to time pursuant to this Agreement. "Notice of Default" is defined in Section 11.01(3). ----------------- "NPL" means the National Priorities List under CERCLA. --- "Obligations" means any principal, premium, interest, Special Interest ----------- and other liabilities payable by the Company or any of the Restricted Subsidiaries under or in respect of this Agreement or the Notes. "Officer" means, with respect to any Person, the President, Chief ------- Executive Officer or the Chief Financial Officer of such Person. "Officers' Certificate" means, with respect to any Person, a --------------------- certificate signed by two Officers of such Person (or, if such Person is a partnership, by two officers of the general partner of such partnership); provided, however, that every Officers' Certificate with respect to compliance with a covenant or condition provided for in this Agreement shall include (i) a statement that the Officers making or giving such Officers' Certificate have read such condition and any definitions or other provisions contained in this Agreement relating thereto and (ii) a statement as to whether, in the opinion of the signers, such condition has been complied with. "Option Agreement" means the Amended and Restated Option Agreement ---------------- dated as of April 27, 2000 among Nassau Broadcasting Company and the other parties named therein, as amended from time to time. "outstanding" means, when used with respect to the Notes as of the ----------- date of determination, all Notes theretofore executed and delivered under this Agreement, except: ------ 21 (i) Notes theretofore canceled by the Company or the Trustee, as the case may be, or delivered to the Company or the Trustee, as the case may be, for cancellation; (ii) Notes, or portions thereof, for whose payment or repayment at the option of the Noteholder money in the necessary amount has been theretofore set aside by the Company with a third party in trust for the holders of such Notes; provided that if such Notes are to be redeemed, notice of such redemption has been duly given as provided in this Agreement; and (iii) Notes which have been paid pursuant to Section 10.08 or in exchange for or in lieu of which other Notes have been executed and delivered pursuant to this Agreement, other than any such Notes in respect of which there shall have been presented to the Company or the Trustee, as the case may be, proof satisfactory to it that such Notes are held by a bona fide purchaser in whose hands such Notes are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount at Maturity of the outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by the Company or any other obligor upon the Notes or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be outstanding. Notes so owned which have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Required Holders the pledgee's right so to act with respect to such Notes and that the pledgee is not the Company or any other obligor upon the Notes or any Affiliate of the Company or of such other obligor. "Ownership Report" means, with respect to any of the Company Stations, ---------------- the reports and certifications filed with the FCC pursuant to 47 C.F.R. (S) 73.3615. "Pari Passu Indebtedness" means any Indebtedness of the Company which ----------------------- ranks pari passu in right of payment with the Notes. "Partnership Agreement" means the Second Restated Agreement of Limited --------------------- Partnership of Nassau Broadcasting Partners, L.P., dated as of December 21, 1995, as amended by the Third Restated Agreement of Limited Partnership of Nassau Broadcasting Partners, L.P., dated as of May 1, 2000. "Partnership Interests" means the partnership interests of the --------------------- Company, including the capital accounts, rights to allocation of income, losses, deductions, credits and distributions of cash flow and capital items of the Company. "Paying Agent" means any Person (including the Company acting as ------------ Paying Agent) authorized by the Company to pay the principal or (or premium, if any, on) or interest on any Notes on behalf of the Company. "Pension Plan" shall mean an employee pension benefit plan (other than ------------ a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code or Section 302 of ERISA and is maintained or contributed to by any ERISA Entity or with respect to which any Company could incur liability. 22 "Permits" means all licenses, permits, certificates of need, approvals ------- and authorizations from all Governmental Authorities required to lawfully conduct a business as presently conducted. "Permitted Holders" means, as of the date of determination, (i) Nassau ----------------- Holdings, Inc. so long as controlled by Mercatanti or his Permitted Transferees, (ii) Nassau Broadcasting Partners, Inc. so long as controlled by Mercatanti, Rahn, Spectrum, Grotech, TD and (following the Aurora Acquisition) the Aurora Investors and their respective Permitted Transferees, (iii) Nassau Broadcasting Co., Inc., so long as controlled by Mercatanti and his Permitted Transferees and (iv) Rahn, Spectrum, Grotech and TD. "Permitted Indebtedness" means any of the following: ---------------------- (a) Indebtedness of any Restricted Subsidiary under the Bank Credit Agreement in an aggregate principal amount not to exceed $144,000,000 at any one time outstanding (minus the amount of any permanent repayments of term loans thereunder, and minus the amount by which any commitments under any revolving credit facility are permanently reduced); (b) Indebtedness of the Company pursuant to the Notes or the Exchange Notes; (c) Indebtedness of the Company owing to any Restricted Subsidiary (but only so long as such Indebtedness is held by such Restricted Subsidiary); provided that any Indebtedness of the Company owing to any such Restricted Subsidiary is subordinated in right of payment from and after such time as the Notes shall become due and payable (whether at Stated Maturity, by acceleration or otherwise) to the payment and performance of the Company's obligations under the Notes; provided further that any transaction pursuant to which any Restricted Subsidiary to which such Indebtedness is owed, ceases to be a Restricted Subsidiary shall be deemed to be an incurrence of such Indebtedness by such Restricted Subsidiary that is not permitted by this clause (c); (d) Indebtedness of the Company or any Restricted Subsidiaries consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition of or disposition of assets, including, without limitation, shares of Equity Interests; (e) Indebtedness of the Company or any Restricted Subsidiary outstanding at the Issue Date; (f) Indebtedness of the Company or any Restricted Subsidiary under Currency Agreements and Interest Rate Agreements entered into in the ordinary course of business; provided that such agreements do not increase the Indebtedness of the obligor outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or interest rates or by reason of fees, indemnities and compensation payable thereunder; 23 (g) Indebtedness of the Company or any Restricted Subsidiary represented by Capitalized Lease Obligations or Purchase Money Indebtedness or other Indebtedness incurred or assumed in connection with the acquisition or development of real or personal movable or immovable property, in each case incurred for the purpose of financing or refinancing all or any part of the purchase price or cost of construction or improvement of property used in the business of the Company or such Restricted Subsidiary, in aggregate or principal amount not to exceed $2.0 million at any one time outstanding; provided that the principal amount of any Indebtedness permitted under this clause (g) did not in each case at the time of incurrence exceed the Fair Market Value, as determined by the Company or such Restricted Subsidiary in good faith, of the property to which it relates; (h) Indebtedness of any Restricted Subsidiary to the Company or another Restricted Subsidiary; (i) any renewals, extensions, substitutions, refinancings or replacements (each, for purpose of this clause, a "refinancing") of any ----------- Indebtedness of the Company (including all or any part of the Notes) or any Restricted Subsidiary by the Company, or any refinancing of any Indebtedness of any Restricted Subsidiary by such Restricted Subsidiary, other than Indebtedness incurred pursuant to clauses (a), (c), (d), (f) and (g) of this definition, including any successive refinancings, so long as (i) any such new Indebtedness shall be in a principal amount that does not exceed the principal amount (or, if such Indebtedness being refinanced provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination) so refinanced, plus the amount of any premium reasonably determined as necessary to accomplish such refinancing and the amount of expenses of the Company or such Restricted Subsidiary incurred in connection with such refinancing, (ii) in the case of any refinancing of Subordinated Indebtedness, such new Indebtedness is made subordinate to the Notes at least to the same extent as the Indebtedness being refinanced, (iii) in the case of any refinancing of Indebtedness that is pari passu in right of payment with the Notes, such new Indebtedness is made pari passu in right of payment with, or subordinate in right of payment to, the Notes and (iv) (A) if such indebtedness being refinanced has an Average Life longer than the Average Life of the Notes, such new Indebtedness has an Average Life longer than the Average Life of the Notes and a final Stated Maturity later than the final Stated Maturity of the Notes and (B) if such Indebtedness being refinanced has an Average Life shorter than the Average Life of the Notes, such Indebtedness has an Average Life no shorter than, and a Final Stated Maturity Date no shorter than, such Indebtedness being so refinanced; (j) Indebtedness of a Person that becomes a Restricted Subsidiary after the Issue Date; provided, however, that (1) such Acquired Indebtedness existed at the time such Person became a Restricted Subsidiary and was not created in connection with or in anticipation thereof, (2) immediately after giving effect to the acquisition of such Person by Borrower no Default shall have occurred and be continuing, and (3) the aggregate amount of Indebtedness outstanding at any time pursuant to this clause (j) shall not exceed $2.0 million for all Restricted Subsidiaries; 24 (k) so long as no Default exists at the time of incurrence thereof or would arise therefrom, guarantees in respect to third-party loans and advances to directors, officers or employees of the Company or any of its Restricted Subsidiaries and, in the case of loans or advances to finance the purchase of Equity Interests of the Company, to the immediate family members or relatives thereof, or trusts or partnerships for the benefit of any of the foregoing, or any of their heirs, executors, or legal representatives, (i) for travel and entertainment expenses incurred in the ordinary course of business, (ii) for relocation expenses incurred in the ordinary course of business or (iii) for any other purpose and, in the case of this clause (iii), in an aggregate principal amount (as to the Company and all its Restricted Subsidiaries), together with the aggregate amount of all Permitted Investments permitted under clause (f) of the definition of "Permitted Investments", of up to $500,000 outstanding at any time, plus the net cash proceeds received by the Company since the Issue Date from the issuance or sale of Equity Interests of the Company to any such Person; and (l) Indebtedness of the Company or any Restricted Subsidiary in addition to that permitted to be incurred pursuant to clauses (a) through (i) above in an aggregate principal amount not in excess of $2.0 million (or, to the extent not denominated in United States dollars, the United States Dollar Equivalent thereof) at any one time outstanding. "Permitted Investments" means any of the following: --------------------- (a) Investments in cash and Cash Equivalents; (b) Investments in the Company or any Restricted Subsidiary; (c) Investments by the Company or any Restricted Subsidiary in another Person, if as a result of such Investment (i) such other Person becomes a Wholly Owned Restricted Subsidiary or (ii) such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to, the Company or a Restricted Subsidiary; (d) Investments received as a part of the settlement of litigation or in satisfaction of extensions of credit to any Person otherwise permitted under this Agreement pursuant to the reorganization, bankruptcy or liquidation of any Person or a good faith settlement of debts with any Person in the ordinary course of business; (e) Investments in existence on the date of this Agreement; or (f) so long as no Default then exists or would arise therefrom, advances, loans or extensions of credit by the Company or any of its Restricted Subsidiaries to (1) officers, directors or employees of the Company or any of its Restricted Subsidiaries and, in the case of loans and advances to finance the acquisition of Equity Interests of the Company, to immediate family members or relatives thereof, or trusts or partnerships for the benefit of any of the foregoing, or any of their heirs, executors, or legal representatives, (i) in the ordinary course of business for travel and entertainment or relocation expenses, (ii) made after the Issue Date for other purposes, not to exceed (as to 25 the Company and all its Restricted Subsidiaries), together with the amount of all guarantees permitted pursuant to clause (k) of the definition of "Permitted Indebtedness", $1.0 million in the aggregate outstanding at any time, plus the net cash proceeds received by the Company since the Issue Date from the issuance or sale of Equity Interests of the Company to any such Person and (iii) relating to indemnification or reimbursement of any officers, directors or employees in respect of liabilities relating to their serving in any such capacity or as otherwise specified in Section 8.06, and (2) officers, directors or employees of the Company or any of its Restricted Subsidiaries in connection with stock option or other Equity Interest plans so long as (x) such loans do not involve cash payments by the Company or any of its Restricted Subsidiaries and (y) neither the Company nor any of its Restricted Subsidiaries incurs any obligations at any time to repurchase the stock or other Equity Interest so purchased. "Permitted Liens" means: --------------- (a) any Lien existing as of the date of this Agreement; (b) Liens on any property or assets of a Subsidiary granted in favor of the Company or any Restricted Subsidiary; (c) Liens securing the Notes; (d) any interest or title of a lessor under any Capitalized Lease Obligation or of a seller or lender under any Purchase Money Indebtedness permitted by this Agreement; provided that (i) the related Indebtedness shall not be secured by any property or assets of the Company or any Restricted Subsidiary other than the property and assets so acquired and (ii) the Lien securing such Indebtedness shall be created within 60 days of such acquisition; (e) Liens securing Indebtedness incurred under clause (a) of the definition of "Permitted Indebtedness"; ---------------------- (f) statutory Liens or landlord's and carrier's, warehouseman's, mechanic's, supplier's, materialmen's, repairmen's or other like Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate proceeding, if a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; (g) Liens for taxes, assessments, government charges or claims that are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and if a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; (h) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory obligations, surety and appeal bonds, government contracts, performance bonds and other obligations of a like nature (including, without limitation, indefeasible rights to use) incurred in the ordinary course of business (other than contracts for the payment of money); 26 (i) easements, servitudes, rights-of-way, restrictions (including, without limitation, zoning restrictions) and other similar charges or encumbrances not interfering in any material respect with the business of the Company or any Restricted Subsidiary incurred in the ordinary course of business; (j) Liens arising by reason of any judgment, decree or order of any court, so long as such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment, decree or order shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired; (k) Liens securing Acquired Indebtedness permitted to be incurred under clause (j) of the definition of "Permitted Indebtedness" created prior to (and not in connection with or in contemplation of) the incurrence of such Indebtedness by the Company or any Restricted Subsidiary; provided that such Lien does not extend to any property or assets of the Company or any Subsidiary other than the assets acquired in connection with the incurrence of such Acquired Indebtedness; (l) Liens securing Interest Rate Agreements or Currency Agreements permitted to be incurred pursuant to clause (f) of the definition of "Permitted Indebtedness" or any collateral for the Indebtedness to which ----------------------- such Interest Rate Agreements or Currency Agreements relate; (m) Liens with respect to assets of a Restricted Subsidiary granted by such Restricted Subsidiary to the Company or a Restricted Subsidiary to secure Indebtedness owing to the Company or such Restricted Subsidiary; (n) pledges and deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of statutory obligations; (o) leases, subleases, licenses or sublicenses granted to third Persons not interfering in any material respect with the business of the Company and its Restricted Subsidiaries; and (p) any extension, renewal or replacement, in whole or in part, of any Lien described in the foregoing clauses (a) through (o), provided that any such extension, renewal or replacement shall be no more restrictive in any material respect than the Lien so extended, renewed or replaced and shall not extend to any additional property or assets. "Permitted Transferees" means, with respect to any Person: (i) the --------------------- referent Person's parents, spouse, siblings, children (natural or adopted), grandchildren or other issue; (ii) trusts the primary beneficiaries of which are any of the foregoing Persons or any charitable organization designated by any of them, which trusts are controlled, directly or indirectly, by the referent Person and any of the Persons under clauses (i) or (iv); (iii) corporations, partnerships, limited liability companies and other Persons if at least 80% of the economic interest in any such Person is owned by the referent Person and any of the Persons under clause (i), (ii) or (iii) or any 27 charitable organization designated by any of them; and (iv) in the case of any Person in clause (i), the heirs, executors, administrators or personal representatives upon the death of such Person or upon the incompetency or disability of such Person for the purposes of the protection and management of such individual's assets. "Person" means any individual, corporation, limited liability company, ------ partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Plan" is defined in Section 4.12(a). ---- "Predecessor Note" of any particular Note means every previous Note ---------------- evidencing all or a portion of the same debt as that evidenced by such particular Note. "Preferred Equity Interests" means, with respect to any Person, any -------------------------- and all shares, interests, participation or other equivalents (however designated) of such Person's preferred or preference stock whether now outstanding, or issued after the Issue Date, and including, without limitation, all classes and series of preferred or preference stock of such Person. "Preferred Return Payment" means a payment in the amount of ------------------------ $2,957,581.36 to Nassau Broadcasting Company, as Limited Partner of the Company, in full satisfaction of the First Contingent Payment and the Second Preferred Amount. "Private Offering" is any offering by any of the Purchasers of some or ---------------- all of the Securities that are Registrable Securities without registration under the Securities Act. "Proceeding" shall mean any claim, counterclaim, action, judgment, ---------- suit, hearing, governmental investigation, arbitration or proceeding, including by or before any Governmental Authority and whether judicial or administrative. "Property" means any interest in any kind of property or asset, -------- whether real, personal or mixed, or tangible or intangible. "Public Equity Offering" means an underwritten public offering of ---------------------- Common Stock of the Company made by the Company pursuant to a registration statement filed with and declared effective by the Commission in accordance with the Securities Act resulting in gross proceeds to the Company (before deducting any underwriting discounts and commissions) of at least $25.0 million. "PUHCA" is defined in Section 4.15. ----- "Purchase Money Indebtedness" means Indebtedness of the Company or any --------------------------- Restricted Subsidiaries incurred at any time within 90 days of, and for the purpose of financing all or any part of the cost of, the construction, expansion, installation, acquisition or improvement by the Company or any Restricted Subsidiary of the Company of any new property used in the business of the Company or such Restricted Subsidiary; provided that the proceeds of such Indebtedness are expended for such purposes within such 90-day period; and provided further that the Net Cash Proceeds from the issuance of such Indebtedness does not exceed, as of 28 the date of incurrence of such Indebtedness, 100% of the lesser of cost or fair market value of the property to which it relates. "Purchase Option" means the option to purchase LP Units granted to the --------------- option holders named in the Option Agreement. "Purchase Price" is defined in Section 2.02. -------------- "Purchaser" and "Purchasers" are defined in the preamble to this --------- ---------- Agreement. "Purchaser Indemnified Person" is defined in Section 13.02(a). ---------------------------- "Qualified Debt Issuance" means any issuance, whether in a public ----------------------- offering or a private placement, of debt securities of Opco or any other Restricted Subsidiary of the Company which gives rise to a mandatory prepayment under Section 2.11 of the Bank Credit Agreement. "Qualified Equity Interests" of any Person means any and all Equity -------------------------- Interests of such Person other than Redeemable Equity Interests and Preferred Equity Interests in the Company. "Qualified Equity Issuance" means the issuance and sale of Qualified ------------------------- Equity Interests by the Company after the Issue Date, whether in an IPO, a private placement or a combination of the foregoing, the aggregate Net Cash Proceeds of which are at least sufficient to redeem the Notes in full in accordance with the provisions of the first sentence of Section 12.03, provided that the amount of Net Cash Proceeds received other than from an IPO account for no more than 30% of the total Net Cash Proceeds received from such Qualified Equity Issuance. "Qualified Institutional Buyer" means any Person that is a "qualified ----------------------------- institutional buyer" within the meaning of Rule 144A. "Radio Stations" means the Company Stations and the LMA Stations. -------------- "Rahn" means Noel P. Rahn, an individual. ---- "Recapitalization" is defined in the third recital to this Agreement. ---------------- "Redeemable Equity Interests" means any class or series of Equity --------------------------- Interests that, either by its terms, by the terms of any security into which it is convertible or exchangeable or by contract or otherwise, is, or upon the happening of an event or passage of time would be, required to be redeemed prior to the final Stated Maturity of the Notes or is redeemable at the option of the holder thereof at any time prior to such final Stated Maturity, or is convertible into or exchangeable for debt securities at any time prior to such final Stated Maturity; provided that any Equity Interests that would not constitute Redeemable Equity Interests but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Equity Interests upon the occurrence of an "asset sale" or "change of control" occurring prior to the Stated Maturity of the Notes shall not constitute Redeemable Equity Interests if the "asset sale" or "change of control" provisions applicable to such Equity Interests are no more favorable in any material respect to the holders of such Equity Interests than the provisions contained in 29 Sections 7.08 and 7.09 are to the Holders, and such Equity Interests specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to the Company's repurchase of such Notes as are required to be repurchased pursuant to the Sections 7.08 and 7.09. "Redemption Date" means, when used with respect to any Note to be --------------- redeemed, the date fixed for such redemption by or pursuant to this Agreement. "Redemption Price", when used with respect to any Note to be redeemed, ---------------- means the price at which it is to be redeemed pursuant to this Agreement. "Registrable Securities" means the Securities and any other securities ---------------------- issued or issuable in exchange for the Securities. As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when (a) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (b) they shall have been distributed to the public pursuant to Rule 144 (or any successor provision) under the Securities Act, (c) they shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent disposition of them shall not require registration or qualification of them under the Securities Act or any similar state law then in force, or (d) they shall have ceased to be outstanding. "Registration Default" is defined in the Exchange and Registration -------------------- Rights Agreement. "Regular Record Date" is defined in Section 10.04. ------------------- "Regulation S" means Regulation S under the Securities Act (or any ------------ successor provision), as it may be amended from time to time. "Reorganization" means a change in the form of organization of the -------------- Company from a limited partnership to a corporation, including the transfer of all assets and liabilities of the Company to its corporate successor and all other transactions consummated in connection therewith, in connection with the IPO or at any time thereafter as required by the Mezzanine Investors Stock Registration Rights Agreement. "Required Holders" means holders of more than 50% of the aggregate ---------------- principal amount at Maturity of outstanding Notes and Exchange Notes, provided that for so long as Merrill Lynch owns more than 50% of the aggregate principal amount at Maturity of outstanding Notes and Exchange Notes, Required Holders shall mean holders of more than 66.66% of the aggregate principal amount at Maturity of outstanding Notes and Exchange Notes. "Resale Materials" is defined in Section 9.02(c). ---------------- "Restricted Payments" is defined in Section 8.02(a). ------------------- 30 "Restricted Subsidiary" means any Subsidiary of the Company that has --------------------- not been designated by the Board of Directors of the Company, by a board resolution delivered to the Noteholders, as an Unrestricted Subsidiary pursuant to and in compliance with Section 8.17. Any such designation may be revoked by a board resolution of the Board of Directors of the Company delivered to the Noteholders, subject to the provisions of Section 8.17. "Revocation" is defined in Section 8.17(b). ---------- "Rule 144" means Rule 144 under the Securities Act (or any successor -------- provision), as it may be amended from time to time. "Rule 144A" means Rule 144A under the Securities Act (or any successor --------- provision), as it may be amended from time to time. "Second Amended and Restated Securityholders Agreement" means the ----------------------------------------------------- Second Amended and Restated Securityholders Agreement to be entered into as of the Issue Date by and among the Company, the Existing Investors and the Purchasers, substantially in the form of Exhibit D attached hereto. --------- "Second Preferred Amount" has the meaning set forth in the Partnership ----------------------- Agreement. "Securities" is defined in the first recital to this Agreement. ---------- "Securities Act" means the Securities Act of 1933, as amended, and the -------------- rules and regulations promulgated by the Commission thereunder. "Security" means any of the Notes or the Shares. -------- "Security Register" has the meaning given to such term in Section ----------------- 10.05(a). "Shareholder" means any Person in whose name a Share is registered. ----------- "Shares" has the meaning specified in the first recital hereto. ------ "Shelf Registration Statement" is defined in the Exchange and ---------------------------- Registration Rights Agreement. "Significant Subsidiary" means, at any date of determination, any ---------------------- Restricted Subsidiary that, together with its subsidiaries, (i) for the most recent fiscal year of the Company accounted for more than 10% of the consolidated revenues of the Company and the Restricted Subsidiaries, or (ii) as of the end of such fiscal year, was the owner of more than 10% of the consolidated assets of the Company and the Restricted Subsidiaries, in each case as set forth on the most recently available consolidated financial statements of the Company and the Restricted Subsidiaries for such fiscal year. "Solvent" means, with respect to any Person as of the date of any ------- determination, that on such date (a) such Person is able to pay its debts and other liabilities, contingent 31 obligations and other commitments as they mature in the normal course of business, (b) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature, and (c) such Person is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Person's property would constitute unreasonably small capital after giving due consideration to current and anticipated future capital requirements and current and anticipated future business conduct and the prevailing practice in the industry in which such Person is engaged. In computing the amount of contingent liabilities at any time, such liabilities shall be computed as the amount which, in light of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Special Interest" is defined in the Exchange and Registration Rights ---------------- Agreement. "Spectrum" means Spectrum Equity Investors, L.P. and Spectrum Equity -------- Investors II, L.P., and their respective successors. "Spectrum Equity Commitment Letter" shall mean the commitment letter --------------------------------- dated as of May 1, 2000 from Spectrum to Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, on behalf of the lenders under the Bank Credit Agreement, and Merrill Lynch Capital Corporation, on behalf of the Purchasers under this Agreement, pursuant to which Spectrum commits to make an equity contribution to the Company of $85 million to finance the Aurora Acquisition and $27 million to finance the Allentown Acquisition. "Spectrum Equity Investment" shall mean, as the context requires, an -------------------------- additional equity investment(s) in the Company made by Spectrum after the Issue Date pursuant to the Spectrum Equity Commitment Letter (x) in the amount of $85 million in respect of the Aurora Acquisition, (y) in the amount of $27 million in respect of the Allentown Acquisition, or (z) cumulatively in the amount of $112 million in respect of the Acquisitions. "Spectrum Notes Take-Out Commitment Letter" means the commitment ----------------------------------------- letter dated as of May 1, 2000 from Spectrum to Merrill Lynch Capital Corporation, on behalf of the Purchasers under this Agreement, evidencing Spectrum's commitment in favor of the Purchasers to make an equity contribution to the Company in such amount as shall be necessary to enable the Company to consummate the Aurora Offer to Purchase. "Spectrum Notes Take-Out Investment" means an equity investment made ---------------------------------- by Spectrum after the Issue Date pursuant to the Spectrum Notes Take-Out Commitment Letter to enable the Company to consummate the Aurora Offer to Purchase. "Stated Maturity" means, with respect to any Note or any installment --------------- of interest thereon, the dates specified in such Note as the fixed date on which the principal of such Note or such installment of interest is due and payable, and when used with respect to any other Indebtedness, means the date specified in the instrument governing such Indebtedness as the fixed date on which the principal of such Indebtedness or any installment of interest thereon is due and payable. "Subordinated Indebtedness" means Indebtedness of the Company which is ------------------------- expressly subordinated in right of payment to the Notes. 32 "Subsequent Purchaser" is defined in Section 4.13(a). -------------------- "Subsidiary" means any Person a majority of the equity ownership or ---------- Voting Equity Interests of which is at the time owned, directly or indirectly, by the Company or by one or more other Subsidiaries or by the Company and one or more other Subsidiaries. "Successor Company" is defined in Section 8.11. ----------------- "Tax Returns" means all returns, declarations, reports, estimates, ----------- information returns and statements required to be filed in respect of any Taxes. "Taxes" is defined to mean any tax, duty, levy, impost, assessment or ----- other governmental charge (including penalties, interest and any other liabilities related thereto). "TD" means Toronto Dominion Capital (U.S.A.), Inc. and its successors -- in interest. "Term Loan Facilities" means the term loan facilities under the Bank -------------------- Credit Agreement. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa- --- 77bbbb) as in effect on the date on which the Indenture is qualified under the TIA. "Time Brokerage Agreements" shall mean the (i) Time Brokerage ------------------------- Agreement, dated February 12, 1997 between Manahawkin Communications Corporation and Nassau Broadcasting Partners, L.P.; (ii) Time Brokerage Agreement, dated August 1, 1998 between Port Jervis Broadcasting Company, Inc. and Nassau Broadcasting Partners, L.P.; (iii) Time Brokerage Agreement dated July 1, 1996 between Nassau Broadcasting Partners, L.P. and North Shore Broadcasting Corporation and Seashore Broadcasting Corporation; (iv) Time Brokerage Agreement, dated January 21, 1999 between Multicultural Radio Broadcasting, Inc. and Nassau Broadcasting Partners, L.P.; and (v) Time Brokerage Agreement, dated November 12, 1998 between Multicultural Radio Broadcasting, Inc. and Nassau Broadcasting Partners, L.P. "Total NH Redemption Payment" means the payment by the Company to --------------------------- Nassau Holdings, Inc., as limited partner, of $7.5 million in respect of the redemption on the Issue Date of 54,111.04 units of Partnership Interest held by Nassau Holdings, Inc. "Transaction Documents" means, collectively, this Agreement, the --------------------- Exchange and Registration Rights Agreement, the Mezzanine Investors Stock Registration Rights Agreement, the Fourth Restated Partnership Agreement, the Second Amended and Restated Securityholders Agreement, the Amendment to Restated Investment Agreement, the Notes, the Exchange Notes, and all certificates, instruments, financial and other statements and other documents made or delivered in connection herewith and therewith. "Transactions" means, collectively, the transactions provided for in, ------------ or contemplated by, the Transaction Documents. "United States" shall have the meaning assigned to such term in ------------- Regulation S. 33 "United States Dollar Equivalent" means, with respect to any monetary ------------------------------- amount in a currency other than the United States dollar, at any time for the determination thereof, the amount of United States dollars obtained by converting such foreign currency involved in such computation into United States dollars at the spot rate for the purchase of United States dollars with the applicable foreign currency as quoted by Reuters at approximately 11:00 a.m. (New York City time) on the date not more than two business days prior to such determination. For purposes of determining whether any Indebtedness can be Incurred (including Permitted Indebtedness), any Investment can be made and any transaction described in Section 8.02 or 8.04 can be undertaken (a "Tested ------ Transaction"), the United States Dollar Equivalent of such Indebtedness, - ----------- Investment or transaction described in Section 8.02 or 8.04 shall be determined on the date Incurred, made or undertaken and no subsequent change in the United States Dollar Equivalent shall cause such Tested Transaction to have been incurred, made or undertaken in violation of this Agreement. "Units" is defined in the first recital to this Agreement. ----- "Unrestricted Subsidiary" means (a) any Subsidiary that at the time of ----------------------- determination shall be an Unrestricted Subsidiary (as designated by the Board of Directors, as provided below) and (b) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary (including any newly acquired or newly formed Subsidiary, but excluding Opco) to be an Unrestricted Subsidiary so long as (i) neither the Company nor any other Subsidiary is directly or indirectly liable for or provides credit support for or guarantees any Indebtedness of such Subsidiary except to the extent otherwise permitted as an investment in an Unrestricted Subsidiary, pursuant to Section 8.02(b)(6), (ii) no default with respect to any Indebtedness of such Subsidiary would permit (upon notice, lapse of time or otherwise) any holder of any other Indebtedness of the Company or any other Subsidiary to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity, (iii) any Investment in such Subsidiary made as a result of designating such Subsidiary an Unrestricted Subsidiary will not violate the provisions of Section 8.17, (iv) neither the Company nor any other Subsidiary has a contract, agreement, arrangement, understanding or obligation of any kind, whether written or oral, with such Subsidiary other than those that might be obtained at the time from persons who are not Affiliates of the Company and (v) neither the Company nor any other Subsidiary has any obligation (1) to subscribe for additional shares of Equity Interests or other equity interest in such Subsidiary or (2) to maintain or preserve such Subsidiary's financial condition or to cause such Subsidiary to achieve certain levels of operating results. Any such designation by the Board of Directors shall be evidenced to the Holders by delivering to the Holders an Officer's Certificate attaching a board resolution giving effect to such designation. The Board of Directors may designate any Unrestricted Subsidiary as a Restricted Subsidiary if, immediately after giving effect to such designation, there would be no Default or Event of Default under this Agreement and the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 8.04. In no event shall the Existing Subsidiaries be designated as Unrestricted Subsidiaries. "Voting Equity Interests" means, with respect to any Person, any class ----------------------- or classes of Equity Interests pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers, trustees or other voting members of the governing body of such Person (irrespective of whether or not, at 34 the time, stock of any other class or classes shall have, or might have, voting power by reason of the happening of any contingency). "Wholly Owned" means, with respect to any Subsidiary, such Subsidiary ------------ if all the outstanding Equity Interests of such Subsidiary (other than any directors' qualifying shares) is owned directly by the Company or by the Company and one or more Wholly Owned Restricted Subsidiaries. "Withdrawal Liability" shall mean liability to a Multiemployer Plan as -------------------- a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part 1 of Subtitle E of Title IV of ERISA. 1.02. Computation of Time Periods. For purposes of computation of ---------------------------------- periods of time hereunder, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". 1.03. Accounting Terms. Accounting terms used but not otherwise ---------------- defined herein shall have the meanings provided, and be construed in accordance with, GAAP. 1.04. Calculations. Solely for purposes of satisfying the 7.5 to ------------ 1 Consolidated Leverage Ratio requirement set forth in Sections 8.04(a) and 8.11(iii), until the earlier of (x) 180 days after the Issue Date and (y) the termination of the Allentown Acquisition Agreement (in the case of clause (ii) below) or the closing thereof and the termination of the Aurora Acquisition Agreement (in the case of clause (i) below) or the closing thereof, Consolidated EBITDA, Consolidated Interest Expense and Consolidated Leverage Ratio shall be calculated on a pro forma basis after giving effect to (i) the Aurora Acquisition, the Aurora Debt Repayment and the borrowings under the Term Loan Facilities for financing thereof and (ii) the Allentown Acquisition. ARTICLE 2 AUTHORIZATION, ISSUANCE AND SALE OF SECURITIES 2.01. Authorization of Issue. ----------------------------- (a) (i) The Company has authorized the issue and sale of 117,359 Units each consisting of (i) $1,000 aggregate principal amount at maturity of 13% (resetting to 14%) Senior Discount Notes due 2010 in the form of Exhibit A --------- hereto and (ii) 0.1644856 Initial LP Units (which may be adjusted by any Antidilutive Initial LP Units issued pursuant to Section 2.01(a)(ii)) plus a number of Incremental LP Units determined as provided in this clause (a). An aggregate amount of 19,303.86 LP Units (or 0.1644856 LP Units per Unit), representing 2.0% of the aggregate Equity Interests of the Company on a Fully Diluted Basis as of the Issue Date, will be issued at the Issue Date (the Initial LP Units"). Additional LP Units (the "Incremental LP Units") - ----------------- -------------------- representing (x) an additional 3.5% of the aggregate Equity Interests of the Company on a Fully Diluted Basis as of the Incremental LP Units Issue Date will be issued on the Incremental LP Units Issue Date if the Notes are not redeemed in full at such date with the Net Cash Proceeds of a Qualified Equity Issuance in accordance with the provisions of the first sentence of Section 12.03(a) and the Aurora Acquisition has been consummated, or (y) an additional 1.75% 35 of the aggregate Equity Interests of the Company on a Fully Diluted Basis as of the Incremental LP Units Issue Date will be issued upon consummation by the Company of the repurchase of Notes having an aggregate Accreted Value of 50% of the total Accreted Value of Notes then outstanding pursuant to the Aurora Offer to Purchase, with such number of Incremental LP Units, in the case of either (x) or (y), being calculated in accordance with Section 2.01(a)(ii). No Incremental LP Units or Antidilutive Initial LP Units will be issued if the Notes are redeemed in full in accordance with the provisions of Section 12.03(a) out of the Net Cash Proceeds of a Qualified Equity Issuance on or prior to the 180/th/ day after the Issue Date. (ii) The percentage of aggregate Equity Interests of the Company on a Fully Diluted Basis represented by the Initial LP Units shall be subject to dilution from 2.00%, immediately after the Issue Date to, in the case where the Aurora Acquisition and the Allentown Acquisition are consummated with the proceeds of the Spectrum Equity Investment pursuant to the Spectrum Equity Commitment Letter, no less than .09% immediately after giving effect to such Spectrum Equity Investment. In no event shall the Initial LP Units be subject to dilution by any Incremental LP Units that may be issued pursuant to clause (a)(i) above. In order to avoid any dilution of the Initial LP Units by any Incremental LP Units issued pursuant to this Section 2.01(a), upon any issuance of Incremental LP Units, such number of additional LP Units ("Antidilutive Initial LP Units") ----------------------------- shall be issued concurrently to the Purchasers in an amount determined in accordance with the formula set forth in Section 2.01(a)(iii). (ii) The number of Incremental LP Units and Antidilutive Initial LP Units to be issued pursuant to clause (a)(i) above shall be calculated on a Fully Diluted Basis as of the Incremental LP Units Issue Date after giving effect to the dilution resulting from any Equity Interests issued on or prior to the Incremental LP Units Issue Date (x) to the Aurora Investors in connection with the consummation of the Aurora Acquisition, (y) to Spectrum in connection with Spectrum Equity Investments in respect of the Aurora Acquisition, the Allentown Acquisition or both Acquisitions or (z) to Spectrum in connection with the Spectrum Notes Take-Out Investment, applying the following formulas and the relevant valuations per LP Unit reflected in Schedule 2.01 attached hereto: ------------- ILP = ( X / ( 1 - ( W + Y + Z ) ) ) * W AILP = ( ( X / ( 1 - ( W + Y + Z ) ) ) * Y ) - V AAILP = ( ( X / ( 1 - ( W + Y + Z ) ) ) * Z ) - U Where: ILP = the number of Incremental LP Units to be issued AILP = the number of Antidilutive Initial LP Units to be issued AAILP = the number of Antidilutive Aurora Investor LP Units to be issued U = the number of Aurora Investor LP units outstanding immediately prior to the Incremental LP Units Issue Date V = the number of Initial LP Units outstanding immediately prior to the Incremental LP Units Issue Date W = a fraction of the total units of Partnership Interest outstanding on a Fully 36 Diluted Basis at the Incremental LP Issue Date equal to (i) .035 in the event no Qualified Equity Issuance has occurred before such date and the Aurora Acquisition has been consummated or (ii) .0175 in the event no Qualified Equity Issuance has occurred before such date and the Aurora Offer to Purchase has been consummated X = the number of units of Partnership Interest outstanding on a Fully Diluted Basis immediately prior to the Incremental LP Units Issue Date, minus the Initial LP Units outstanding immediately prior to the Incremental LP Units Issue Date minus the Aurora Investor LP Units outstanding immediately prior to the Incremental LP Units Issue Date Y = a fraction, the numerator of which is the total number of Initial LP Units outstanding immediately prior to the Incremental LP Units Issue Date and the denominator of which is the total number of units of Partnership Interest outstanding on a Fully Diluted Basis immediately prior to the Incremental LP Units Issue Date Z = a fraction, the numerator of which shall equal the total number of Aurora Investor LP Units outstanding immediately prior to the Incremental LP Units Issue Date, and the denominator of which shall equal the total number of units of Partnership Interest outstanding on a Fully Diluted Basis immediately prior to the Incremental LP Units Issue Date By way of example and solely for illustrative purposes (as reflected in Schedule 2.01), assuming that the aggregate percentage interest of the ------------- Initial LP Units on a Fully Diluted Basis immediately prior the Incremental LP Units Issue Date was 0.9428%, the Incremental LP Units would be calculated as follows: ILP = ( X / ( 1 - ( W + Y + Z ))) * W ILP = (( 2,047,413.610750 - 19,303.856333 - 257,671.617648 ) / ( 1 - (.03500000 + ( 19,303.856333 / 2,047,413.610750 ) + ( 257,671.617648 / 2,047,413.610750 )))) * .03500000 ILP = ( 1,770,438.136769 / ( 1 - (.03500000 + .00942841 + .12585225 ))) * .03500000 ILP = ( 1,770,438.136769 / ( 1 - .17028066 )) * .03500000 ILP = ( 1,770,438.136769 / .82971934 ) * .03500000 ILP = 2,133,779.533910 * .03500000 ILP = 74,682.28 units the Antidilutive Initial LP Units would be calculated as follows: AILP = (( X / ( 1 - ( W + Y + Z ))) * Y ) - V AILP = ((( 2,047,413.610750 - 19,303.856333 - 257,671.617648 ) / ( 1 - (.03500000 + ( 19,303.856333 / 2,047,413.610750 ) + ( 257,671.617648 / 2,047,413.610750 )))) * ( 19,303.856333 / 2,047,413.610750 )) - 19,303.856333 AILP = (( 1,770,438.136769 / ( 1 - (.03500000 + .00942841 + .12585225 )) ) * .00942841 ) - 19,303.856333 AILP = (( 1,770,438.136769 / ( 1 - .17028066 )) * .00942841 ) - 19,303.8 56333 37 AILP = (( 1,770,438.136769 / .82971934 ) * .00942841 ) - 19,303.856333 AILP = ( 2,133,779.533910 * .00942841 ) - 19,303.856333 AILP = 20,118.1482953 - 19,303.856333 AILP = 814.29 units and the Antidilutive Aurora Investor LP Units would be calculated as follows: AAILP = (( X / ( 1 - ( W + Y + Z ))) * Z ) - U AAILP = ((( 2,047,413.610750 - 19,303.856333 - 257,671.617648 ) / ( 1 - (.03500000 + ( 19,303.856333 / 2,047,413.610750 ) + ( 257,671.617648 / 2,047,413.610750 ) ) ) ) * ( 257,671.617648 / 2,047,413.610750 ) ) - 257,671.617648 AAILP = (( 1,770,438.136769 / ( 1 - (.03500000 + .00942841 + .12585225 ) )) * .12585225 ) - 257,671.617648 AAILP = (( 1,770,438.136769 / ( 1 - .17028066 )) * .12585225 ) - 257,671 .617648 AAILP = (( 1,770,438.136769 / .82971934 ) * .12585225 ) - 257,671.617648 AAILP = ( 2,133,779.533910 * .12585225 ) - 257,671.617648 AAILP = 268,540.955347 - 257,671.617648 AAILP = 10,869.34 units (iv) If at any time after the Incremental LP Units Issue Date the Company shall issue or sell any additional Equity Interests for a consideration per share or unit of the Equity Interests less than the Current Market Value per share or unit of Equity Interests, such number of Incremental LP Units (or shares of Common Stock into which such Incremental LP Units are converted upon a Reorganization) to which the Purchasers shall be entitled hereunder shall be adjusted by multiplying (A) such number of Incremental LP Units by (B) a fraction, (1) the numerator of which shall be the number of outstanding LP Units (or shares of Common Stock into which such LP Units are converted upon a Reorganization) determined on a Fully Diluted Basis immediately prior to the issuance of such additional Equity Interests plus the number of additional Equity Interests so issued and (2) the denominator of which shall be the number of outstanding LP Units (or shares of Common Stock into which such LP Units are converted upon a Reorganization) immediately prior to the issuance of such additional Equity Interests plus the number of LP Units (or shares of Common Stock into which such LP Units are converted upon a Reorganization) which the aggregate consideration for the total number of such additional Equity Interests so issued would purchase at the Current Market Value per share or unit of Equity Interests. In addition, if any issuance of Equity Interests to the Aurora Investors related to the Aurora Acquisition or to Spectrum related to the Spectrum Equity Investment or the Spectrum Notes Take-Out Investment occurs after the Incremental LP Units Issue Date, the Company agrees to make an equitable adjustment to the number of Incremental LP Units and Antidilutive Initial LP Units previously issued to the Purchasers so that the Purchasers shall derive the same economic benefit as they would have had if each such issuance had occurred prior to the Incremental LP Units Issue Date, assuming an implied equity value of the Company and value per LP Unit at the date of each such issuance as reflected on Schedule 2.01 in ------------- the rows "Implied Equity Value" and "Implied Equity Value/Unit." 38 (b) The Notes and the LP Units will not be separately transferable until the Separability Date. "Separability Date" shall mean the earliest to ---------------- occur of: (i) the 180th day from the Issue Date, (ii) the date on which a registration statement under the Securities Act with respect to a registered exchange offer for the Notes is declared effective under the Securities Act, (iii) the occurrence of an Event of Default, (iv) an IPO or (v) such earlier date as determined by the Required Holders in their sole discretion and specified to the Company in writing. Notwithstanding the foregoing, in the event a Change of Control is proposed and the Company commences a Change of Control Offer prior to the Separability Date, as determined by the preceding sentence, the Separability Date shall be such earlier date of commencement. 2.02. Sale. On the basis of the representations and warranties herein ----------- contained and subject to the terms and conditions herein set forth, the Company agrees to sell to each Purchaser, and each Purchaser, acting severally and not jointly, agrees to purchase from the Company, the number of Units set forth in Schedule A opposite the name of such Purchaser at a purchase price (the - ---------- "Purchase Price") of $511.26 for each Unit. -------------- 2.03. Closing. The purchase and sale of Securities pursuant to this -------------- Agreement shall occur at the offices of Skadden Arps Slate Meagher & Flom LLP, New York City time, on May 4, 2000, or such other time as shall be agreed upon by the Purchasers and the Company (such time and date of payment and delivery being herein called the "Closing Time"). At the Closing Time, the Company will ------------ deliver to each Purchaser certificates for the Securities to be purchased by such Purchaser at the Closing Time, in such denominations (in the case of the Notes any integral multiple of $1,000 principal amount at maturity) as such Purchaser may request, dated the Closing Time and registered in such Purchaser's name, against payment by such Purchaser to the Company by wire transfer of immediately available funds in the amount of the Purchase Price to be paid by such Purchaser therefor to such bank account or accounts as the Company may request in writing at least two Business Days prior to the Closing Time. 2.04. Allocation of Purchase Price. For all income tax purposes, the ----------------------------------- Company and the Purchasers agree that the Purchase Price paid by each Purchaser shall be allocable as follows: $488.91 to each $1,000 principal amount at maturity of Notes and $22.34 to each LP Unit. ARTICLE 3 CONDITIONS TO CLOSING Each Purchaser's several obligation to purchase and pay for the Securities to be purchased by it at the Closing Time is subject to the satisfaction or waiver by each Purchaser prior to or at the Closing Time of each of the conditions specified below in this Section 3: 3.01. Representations and Warranties. Each of the representations and ------------------------------------- warranties of the Company in this Agreement and in each of the other Transaction Documents shall be true and correct when made and at and as of the Closing Time as if made on and as of the Closing Time (unless expressly stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct as of such earlier date and, in any such case, there shall not have occurred since such date and prior to the Closing Time any 39 developments with respect to the subject matter of any such representation and warranty which would have a Material Adverse Effect as determined by the Purchasers in their reasonable judgment). 3.02. Performance; No Default Under Other Agreements. The Company ---------------------------------------------------- shall have performed and complied in all material respects with all agreements and conditions contained in this Agreement and each of the other Transaction Documents required to be performed or complied with by any of them prior to or at the Closing Time, and after giving effect to the issue and sale of the Securities and the other Transactions (and the application of the proceeds thereof as contemplated by Section 4.17 hereof and the other Transaction Documents), no Default or Event of Default shall have occurred and be continuing and no default or event of default shall have occurred and be continuing under any of the other Transaction Documents. 3.03. Compliance Certificates. ------------------------------ (a) Officers' Certificate. The Company shall have delivered to the -------------------------- Purchasers an Officers' Certificate, dated the Closing Time, in the form of Exhibit G hereto, certifying that the conditions specified in Sections 3.01, - --------- 3.02, 3.05, 3.06, 3.07, 3.09, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15 and 3.16 have been fulfilled. (b) Secretary's Certificate. The Issuers shall have delivered to the ---------------------------- Purchasers a certificate substantially in the form of Exhibit H hereto --------- certifying as to the Company's certificate of limited partnership and partnership agreement and resolutions of the General Partner attached thereto, the incumbency and signatures of certain officers of the Company and the General Partner and other proceedings of the Company relating to the authorization, execution and delivery of the Securities, this Agreement, the Exchange and Registration Rights Agreement, the Mezzanine Investors Stock Registration Rights Agreement, the Second Amended and Restated Securityholders Agreement, the Fourth Restated Partnership Agreement, the Amendment to Restated Investment Agreement and the other Transaction Documents to the extent the Company is a party thereto. 3.04. Opinions of Counsel. Such Purchaser shall have received the -------------------------- favorable opinions in form and substance satisfactory to it, dated the Closing Time, from (i) Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Company, substantially in the form set forth in Exhibit I and as to such other --------- matters as such Purchaser may reasonably request, (ii) Tim Smith, Esq., General Counsel of the Company, substantially in the form of Exhibit J and as to such --------- other matters as such Purchaser may reasonably request, (iii) counsel to each Existing Investor that is party to the Second Amended and Restated Securityholders Agreement, the Amendment to Restated Investment Agreement and the Fourth Restated Partnership Agreement, substantially in the form set forth in Exhibit K and as to such other matters as such Purchaser may reasonably --------- request, and (iv) Shearman & Sterling, the Purchasers' special counsel in connection with such transactions, as to such matters as are customarily opined on in transactions of the nature contemplated by the Transaction Documents. 3.05. Recapitalization. After giving effect to the Recapitalization, ----------------------- (a) the Company and its Subsidiaries shall have no outstanding Indebtedness other than as set forth on Schedule 4.18 and (i) Opco's borrowings under the Bank Credit Agreement and (ii) the 40 Indebtedness evidenced by the Notes; (b) the Company's only outstanding Equity Interests, on a Fully Diluted Basis as of the Issue Date, stated as a percentage of total Equity Interests on a Fully Diluted Basis at such date and as a number of units of Partnership Interest, will be as set forth in Schedule 3.05 under the columns entitled "Adjustment for 2% LP Units on Mezzanine Notes" and "Corresponding Units," respectively; and (c) the 97,000 LP Units held by Nassau Broadcasting Company shall no longer be entitled to the First Contingent Payment, the Second Preferred Amount or any other form of preferred return in respect of the Company's operating results, proceeds from dispositions, upon liquidation or otherwise. 3.06. No Adverse Events; No Operations of the Company. (i) Neither of ------------------------------------------------------ the Issuers nor any of their respective Subsidiaries shall have sustained since the Audit Date any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, (ii) except as contemplated by Section 3.05 hereof, since the Audit Date there shall not have been any change in the Equity Interests or long-term debt of the Company or any of its Subsidiaries or any material change, or any development involving a prospective material change, in or affecting the business, management, operations, affairs, condition (financial or otherwise), assets, property, prospects or results of operations of the Company and its Subsidiaries and (iii) except as contemplated by Section 3.05 hereof, neither the Company nor any of its Subsidiaries shall have changed their respective jurisdiction of incorporation or been a party to any merger or consolidation or conversion or succeeded to all or any substantial part of the liabilities of any other Person at any time following the Audit Date and there shall have occurred no event which constitutes a Change of Control of the Company and the Company shall not have entered into any agreement or understanding which, if consummated, would constitute a Change of Control of the Company. 3.07. Financial Information. Such Purchaser shall have received a pro ---------------------------- forma consolidated balance sheet for the Company and its Subsidiaries as of the Closing Time, in each case after giving effect to the Transactions to be completed on or prior to such date, which have been certified by the chief financial officer of the Company and which are in form and substance satisfactory to such Purchaser. 3.08. Proceedings and Documents. All corporate and other proceedings -------------------------------- in connection with the Transactions and the other transactions contemplated by this Agreement and the other Transaction Documents, and all documents and instruments incident to such transactions and the terms thereof, shall be reasonably satisfactory to such Purchaser and such Purchasers' special counsel, and such Purchaser and the Purchasers' special counsel shall have received all such counterpart originals or certified or other copies of such documents as it or they may reasonably request. All fees owing to, and all expenses reimbursable by, the Company and its Affiliates as of the Closing Time pursuant to this Agreement and the engagement letter with Merrill Lynch signed by the Company shall have been paid in full. 3.09. Purchase Permitted by Applicable Law, Etc. At the Closing Time, ------------------------------------------------ such Purchaser's purchase of the Notes shall (a) be permitted by the laws and regulations of each jurisdiction to which it is subject, (b) not violate any Applicable Law (including, without limitation, Regulation U, T or X of the Board of Governors of the Federal Reserve System) and 41 (c) not subject such Purchaser to any tax, penalty or liability under or pursuant to any Applicable Law, which Applicable Law was not in effect on the date hereof. 3.10. Transaction Documents in Force and Effect; Information. ------------------------------------------------------------- (a) Transaction Documents. The Purchasers shall have received true -------------------------- and correct copies of all Transaction Documents and (i) such documents (A) shall have been duly executed and delivered by each party whose execution and delivery thereof is necessary for the effectiveness thereof and be in full force and effect, (B) shall be in form and substance reasonably satisfactory to the Purchasers and their special counsel and (C) shall be valid and legally binding obligations of the parties thereto enforceable against each of them in accordance with its respective terms, subject to the Enforceability Exceptions, and (ii) there shall have been no material amendments, alterations, modifications or waivers of any provision thereof since the date of this Agreement and there shall be no default or event of default in existence under any of such agreements. (b) Accuracy of Information. All written information furnished the ---------------------------- Company and their respective representatives to the Purchasers on or prior to the Closing Time with respect to the business, management, operations, affairs, condition (financial or otherwise), assets, property, prospects or results of operations of the Company and their Subsidiaries, as the case may be, shall be accurate and complete in all material respects, taken as a whole. 3.11. No Violation; No Legal Constraints; Consents, Authorizations ------------------------------------------------------------------- and Filings, Etc. - ---------------- (a) The consummation by the Company and its Subsidiaries of the Transactions shall not contravene, violate or conflict with any Applicable Law. (b) All consents, authorizations and filings, if any, required in connection with the execution, delivery and performance by the Company and its Subsidiaries of the Transaction Documents to which it is a party shall have been obtained or made and shall be in full force and effect, except, in the case of the Exchange and Registration Rights Agreement and the Mezzanine Investors Common Stock Registration Rights Agreement, for such consents, authorizations and filings which are required under federal or state securities laws. (c) There shall be no inquiry, injunction, restraining order, action, suit or proceeding pending or entered or any statute or rule proposed, enacted or promulgated by any Governmental Authority or any other Person which, in the opinion of the Purchasers, (i) individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect or which seeks to enjoin or seek damages against the Company or any of the Company's Subsidiaries or any of the Purchasers as a result of the Transactions, including the issuance of the Notes, (ii) relates to any of the Transactions and has or will have a material adverse effect on any Purchaser, (iii) alleges liability on the part of any Purchaser in connection with this Agreement, any other Transaction Documents or the Transactions or any of the other transactions contemplated hereby or thereby or (iv) would bar the issuance of the Securities or the use of the proceeds thereof in accordance with the terms of this Agreement and the other Transaction Documents. 42 3.12. Bank Credit Agreement. The Company, Opco and each other ---------------------------- Subsidiary that is party thereto shall have entered into the Bank Credit Agreement and related security agreement and other ancillary documentation, and there shall have been no material amendments, alterations or waivers of any provisions thereof, and there shall exist no condition as of the Closing Time (after giving effect to the Transactions contemplated by this Agreement and the application of the proceeds from the sale of the Notes) that would constitute a Default or Event of Default (each as defined under the Bank Credit Agreement) under the Bank Credit Agreement; and the Purchasers shall have received true and correct copies of the Bank Credit Agreement. 3.13. Acquisition Agreements. The Purchasers shall have true and ----------------------------- correct copies of each of the Allentown Acquisition Agreement and the Aurora Acquisition Agreement and any amendments thereto, and there shall have been no material amendments, alterations, modifications or waivers of any provisions of each of the Acquisition Agreements since the date of this Agreement. 3.14. Repayment of Existing Credit Facilities. The Company shall have ---------------------------------------------- effected, or caused Opco to effect, the Existing Credit Facilities Repayment and the Existing Notes Repayment on terms and conditions and pursuant to documentation reasonably satisfactory to the Purchasers. All Liens in respect of the Existing Credit Facilities shall have been released and Merrill Lynch shall have received evidence thereof reasonably satisfactory to Merrill Lynch and a "pay-off" letter or letters reasonably satisfactory to Merrill Lynch with respect to the Existing Credit Facilities Repayment; in addition, Merrill Lynch shall have received from any Person holding any Lien securing any such Indebtedness, such Uniform Commercial Code termination statements, mortgage releases and other instruments, in each case in proper form for recording, as Merrill Lynch shall have reasonably requested to release and terminate of record the Liens securing such Indebtedness (or arrangements for such release and termination reasonably satisfactory to Merrill Lynch shall have been made). 3.15. Spectrum Equity Commitments. The Purchasers shall have received ---------------------------------- (a) the Spectrum Notes Take-Out Commitment Letter and (b) the Spectrum Equity Commitment Letter. 3.16. Payment of Fees and Expenses. All accrued and unpaid fees and ----------------------------------- expenses (including the fees and expenses of Shearman & Sterling and of Richards, Layton & Finger, P.A.) of the Purchasers in connection with the Transaction Documents shall have been paid. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Issuers represent and warrant to each of the Purchasers as of the date hereof and as of the Closing Time that: 4.01. Due Incorporation; Power and Authority. Each of the Company and --------------------------------------------- each of its Subsidiaries (a) is (in the case of a Subsidiary) a corporation or limited liability company 43 duly organized or formed, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation or (in the case of the Company) a limited partnership duly formed, validly existing and in good standing under the law of the State of Delaware, (b) is duly qualified as a foreign corporation or limited liability company (in the case of a Subsidiary) or limited partnership (in the case of the Company) to transact business and is in good standing in each jurisdiction in which such qualification is required, other than any failures to so qualify or to be in good standing which, individually or in the aggregate, have not had and would not have a Material Adverse Effect, (c) has all requisite corporate or limited liability company (in the case of a Subsidiary) or partnership (in the case of the Company) power and authority to own, lease and operate its properties and to conduct its businesses as they are currently conducted, and (d) has all requisite corporate or limited liability company power (in the case of a Subsidiary) or partnership (in the case of the Company) and authority to enter into and perform its obligations under each of the Transaction Documents to which it is a party. 4.02. Capitalization. As of the date of this Agreement, after giving --------------------- effect to the execution of the Fourth Restated Partnership Agreement and the Recapitalization, the Company will be authorized to issue 2,500,000 units of Partnership Interest, of which 10,000 units of Partnership Interest will have been issued to Nassau Broadcasting Partners, Inc. as General Partner, 97,000 LP Units will have been issued to Nassau Broadcasting Company, 145,888.96 LP Units will have been issued to Nassau Holdings, Inc., and 19,303.86 LP Units will have been issued to the Purchasers as Initial LP Units hereunder. Of the remaining 2,227,807.18 units of Partnership Interest, (v) 693,000 will have been reserved for issuance as LP Units to Spectrum, Grotech, TD and Rahn upon exercise of the Purchase Option in accordance with the Option Agreement, (w) 814.29 and 74,682.28 will have been reserved for issuance to the Purchasers as Antidilutive Initial LP Units and Incremental LP Units, respectively, in accordance with Section 2.01(a) of this Agreement, (x) 257,671.62 and 10,869.35 will have been reserved for issuance to the Aurora Investors as Aurora Investor LP Units and Antidilutive Aurora Investor LP Units, respectively, in accordance with the Purchase and Exchange Agreement, (y) 824,549.18 will have been reserved for issuance to Spectrum in the event that Spectrum funds the full amount of the Spectrum Equity Commitment with 625,773.93 LP Units issuable in respect of the Aurora Acquisition and 198,775.25 LP Units issuable in respect of the Allentown Acquisition and (z) 237,569.55 LP Units will have been reserved for issuance to Spectrum in the event of a Spectrum Notes Take-Out Investment. Since the Audit Date, the Company (i) has not issued any additional units of partnership interest and (ii) has not split, combined or reclassified any of its units of partnership interest. All the issued and outstanding units of partnership interest of the Company have been duly authorized and are free of preemptive rights other than as provided in the Second Amended and Restated Securityholders Agreement. Except as set forth on Schedule 4.02, there are no securities of the ------------- Company or any of its Subsidiaries that are convertible into or exchangeable for units of any Equity Interests of the Company or any of its Subsidiaries, and no options, warrants, calls, subscriptions, convertible securities, or other rights, agreements or commitments which obligate the Company or any of its Subsidiaries to issue, transfer or sell any units of Equity Interests of, or other interests in, the Company or any of its Subsidiaries. No antidilution or other adjustments to the number or type of units of Equity Interests issuable upon exercise, conversion or exchange of any such securities or under any such agreements or arrangements will be required by reason of the Transactions or any such adjustments have been waived in writing. Except as set forth on Schedule -------- 4.02, there are no outstanding obligations of the Company or any of its - ---- Subsidiaries to repurchase, redeem or otherwise acquire any shares of 44 Equity Interests of, or other interests in, the Company or any of its Subsidiaries and neither the Company nor any of its Subsidiaries has any awards or options outstanding under any stock option plans or agreements or any other outstanding stock-related awards. After the Closing Time, neither the Company nor any of its Subsidiaries will have any obligation to issue, transfer or sell any shares of Equity Interests of, or other interests in, the Company or its Subsidiaries except pursuant to the Transaction Documents. Except as set forth on Schedule 4.02, there are no voting trusts or other agreements or ------------- understandings to which the Company or any of its Subsidiaries is a party with respect to the holding, voting or disposing of Equity Interests of, or other interests in, the Company or any of its Subsidiaries. As of the date hereof, neither the Company nor any of its Subsidiaries has any outstanding bonds, debentures, notes or other obligations or other securities (other than the units of partnership interest (in the case of the Company) and Common Stock (in the case of any Subsidiary) that entitle the holders thereof to vote with the stockholders of the Company or any of its Subsidiaries on any matter or which are convertible into or exercisable for securities having such a right to vote. 4.03. Subsidiaries. Schedule 4.03 correctly states as of the Closing ------------------- ------------- Time (a) the name of each of the Company's Subsidiaries and any other Person whose shares of Equity Interests are owned, directly or indirectly, by the Company (each, an "Equity Investee"), (b) the name of each holder of each --------------- class of outstanding Equity Interests or other securities of the Company or any of its Subsidiaries or any Equity Investee and the nature and number of such securities held by such holder, and (c) the number of authorized, issued and treasury shares of each Subsidiary of the Company and each Equity Investee. All Equity Interests of Opco will be owned by the Company at the Closing Time. The Company does not own or control, directly, or indirectly, any Equity Interests or other interest or investment (whether equity or debt) in any Person other than the Equity Interests of its Subsidiaries and Equity Investees listed on Schedule 4.03. Each issued and outstanding unit of Equity Interests of each ------------- Subsidiary and Equity Investee of the Company (a) has been duly authorized and validly issued and is fully paid and nonassessable and free of preemptive rights and (b) except for any Equity Interests of any Equity Investee not owned directly of indirectly by the Company as shown on Schedule 4.03, is owned by the ------------- Company, directly or through Subsidiaries, free and clear of all Liens except in connection with the Bank Credit Agreement and the transactions contemplated thereby. 4.04. Due Authorization, Execution and Delivery. ------------------------------------------------ (a) Agreement. This Agreement has been duly authorized, executed and -------------- delivered by the Issuers and constitutes a valid and legally binding obligation of each of the Issuers, enforceable against the Issuers in accordance with its terms, subject to the Enforceability Exceptions. (b) Fourth Restated Partnership Agreement. Each of the Agreement and ------------------------------------------ the Second Amended and Restated Securityholders Agreement has been duly authorized by each party thereto other than the Purchasers and, at the Closing Time, will have been duly executed and delivered by each party thereto other than the Purchasers and, when duly executed and delivered by the Purchasers, will constitute a valid and legally binding obligation of each such party, enforceable against each party in accordance with its terms, subject to the Enforceability Exceptions. 45 (c) Notes and Exchange Notes. The Notes to be purchased by the ----------------------------- Purchasers from the Issuers are in the form contemplated by this Agreement, have been duly authorized for issuance and sale pursuant to this Agreement and, when issued and delivered by the Issuers at the Closing Time as provided herein, will have been duly executed, issued and delivered by the Issuers, and will constitute valid and legally binding obligations of the Issuers, enforceable against them in accordance with their terms, subject to the Enforceability Exceptions. If and when the Exchange Notes are issued pursuant to the Exchange and Registration Rights Agreement and this Agreement in accordance with the terms thereof and hereof, the Exchange Notes will have been duly authorized for issuance by the Issuers, will have been duly executed, issued and delivered by the Issuers, and will constitute valid and legally binding obligations of the Issuers, enforceable against them in accordance with their terms, subject to the Enforceability Exceptions. (d) Initial LP Units. The Initial LP Units to be purchased by the --------------------- Purchasers from the Company are in the form contemplated by this Agreement and the Fourth Restated Partnership Agreement, have been duly authorized for issuance and sale pursuant to this Agreement and the Fourth Restated Partnership Agreement and, when issued and delivered by the Company against payment therefor at the Closing Time as provided herein and therein, will have been duly executed, issued and delivered by the Company, and will be validly issued LP Units, and the holders thereof will be entitled to the benefits of this Agreement, the Fourth Restated Partnership Agreement, the Second Amended and Restated Securityholders Agreement and the Mezzanine Investors Common Stock Registration Rights Agreement. (e) Antidilutive Initial LP Units and Incremental LP Units; Common ------------------------------------------------------------------- Stock. (i) The Antidilutive Initial LP Units and the Incremental LP Units have - ----- been duly authorized and reserved by the Company, before giving effect to any adjustment as a result of Section 2.01(a)(iv), and, when issued and delivered in accordance with the terms of this Agreement and the Fourth Restated Partnership Agreement, will be validly issued LP Units, and the holders therefor will be entitled to the benefits of this Agreement, the Fourth Restated Partnership Agreement, the Second Amended and Restated Securityholders Agreement and the Mezzanine Investors Common Stock Registration Rights Agreement. (ii) Upon the Reorganization, the Company shall take such steps as shall be necessary to ensure that (x) each Holder receives such number of Exchange Shares in respect of its LP Units as results in such Holder receiving an equivalent percentage of Equity Interests in the Company after the Reorganization as such Holder owned immediately prior to giving effect to the Reorganization, and (y) the Exchange Shares in respect of the Incremental LP Units are duly authorized and reserved by the Company and that, when executed by the Company and countersigned by the Company's transfer agent and issued and delivered in accordance with the terms of the Purchase Agreement and the Fourth Restated Partnership Agreement, such Exchange Shares will be validly issued, fully paid and non-assessable and will not be subject to any preemptive or similar rights. (f) Exchange and Registration Rights Agreement. The Exchange and ----------------------------------------------- Registration Rights Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to the Enforceability Exceptions. 46 (g) Mezzanine Investors Common Stock Registration Rights Agreement. ------------------------------------------------------------------- The Mezzanine Investors Common Stock Registration Rights Agreement has been duly authorized by the Company and, at the Closing Time, will have been duly executed and delivered by the Company and, when executed by the Purchasers, will constitute a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to the Enforceability Exceptions. (h) Other Transaction Documents. Each Transaction Document (other -------------------------------- than those referred to in paragraphs (a) through (e) of this Section 4.04) (i) has been duly authorized, executed and delivered by the Company, to the extent a party thereto, and (ii) constitutes a valid and legally binding obligation of the Company, to the extent a party thereto, enforceable against the Company, in accordance with its terms, subject to the Enforceability Exceptions. 4.05. Non-Contravention; Authorizations and Approvals. Neither the ------------------------------------------------------ Company nor any of the Company's Subsidiaries is (i) in violation of its certificate of limited partnership, certificate of formation, partnership agreement, operating agreement or bylaws (or comparable constituent or governing documents) or (ii) is in default (or, with the giving of notice, lapse of time or both, would be in default) under any note, bond, mortgage, indenture, deed of trust, loan or credit agreement, license, franchise, Permit, lease, contract or other agreement, instrument, commitment or obligation to which the Company or any of the Company's Subsidiaries is a party or by which the Company or any of the Company's Subsidiaries or any of its properties or assets is bound (including, without limitation, the Bank Credit Agreement), or under which the Company or any of the Company's Subsidiaries or any of its properties or assets is entitled to a benefit (each, a "Contract"), except for any such defaults -------- that, individually or in the aggregate, have not had and would not have a Material Adverse Effect. None of (a) the execution and delivery by the Company or any of the Company's Subsidiaries of any of the Transaction Documents to which it is a party, (b) the performance by any of them of their respective obligations thereunder, (c) the consummation of the transactions contemplated thereby or (d) the issuance and delivery of the Securities hereunder will: (i) violate, conflict with or result in a breach of any provisions of the certificate of limited partnership, certificate of formation, partnership agreement, operating agreement or bylaws (or comparable constituent or governing documents) of the Company or any of the Company's Subsidiaries; (ii) violate, conflict with, result in a breach of any provision of, constitute a default (or an event which, with notice, lapse of time or both, would constitute a default) under, result in the termination or in a right of termination of, accelerate the performance required by or benefit obtainable under, result in the triggering of any payment or other obligations (including any repurchase or repayment obligations) pursuant to, result in the creation of any Lien upon any of the properties of the Company or any of the Company's Subsidiaries under, or result in their being declared void, voidable, subject to withdrawal, or without further binding effect, any of the terms, conditions or provisions of any Contract, except for any such violations, conflicts, breaches, defaults, accelerations, terminations or other matters which, individually or in the aggregate, have not had and would not have a Material Adverse Effect; (iii) require any consent, approval or authorization of, or declaration, filing or registration with, any Governmental Authority, except for those consents, approvals, authorizations, declarations, filings or registrations which have been obtained or made or the failure of which to obtain or make, individually or in the aggregate, have not had and would not have a Material Adverse Effect; or (iv) violate any Applicable Laws 47 applicable to the Company, any of the Company's Subsidiaries or any of their respective properties or assets. 4.06. Company Financial Statements. The Company has delivered to the ----------------------------------- Purchasers (collectively, the "Company Financial Statements") (i) complete and correct copies of the audited consolidated balance sheets of the Company and its Subsidiaries as of December 31, 1998 and 1999 and the related audited consolidated statements of operations and cash flows for each of the three years ended December 31, 1999, including the footnotes thereto, certified by Grant Thornton LLP, the Company's independent certified public accountants, (ii) complete and correct copies of the unaudited consolidated pro forma balance sheet of the Company and its Subsidiaries as of the latest available balance sheet date, and the unaudited pro forma consolidated statements of operations for the twelve months then ended and (iii) complete and correct copies of unaudited consolidated balance sheet of the Company and its Subsidiaries and the related unaudited statement of operations and cash flows for each full interim month (other than April 2000) between December 31, 1999 and the date of this Agreement. Each of the consolidated balance sheets contained in the Company Financial Statements fairly presents the consolidated financial position of the Company and its Subsidiaries as of its date and each of the consolidated statements of operations and cash flows included in the Company Financial Statements fairly presents the consolidated results of operations and income, retained earnings or cash flows, as the case may be, of the Company and its Subsidiaries for the periods to which they relate (subject, in the case of any unaudited interim financial statements, to normal year-end adjustments that will not be material in amount or effect), in each case in accordance with GAAP.The pro forma financial statements of the Company and its Subsidiaries contained in the Company Financial Statements fairly present the consolidated financial position and results of operations of the Company and its Subsidiaries as of the date and for the periods to which they relate, in each case after giving effect to the Transactions and the application of the proceeds of all Indebtedness to be incurred in connection therewith, have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements and have been properly compiled on the bases described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the Transactions. All projections provided by or on behalf of the Company to the Purchasers in connection with the Transactions have been prepared in good faith based on assumptions believed by management of the Company to be reasonable. 4.07. Absence of Undisclosed Liabilities or Events. --------------------------------------------------- (a) Except as set forth in Schedule 4.07(a), neither the Company nor ---------------- any of its Subsidiaries has any liabilities or obligations, whether accrued, contingent or otherwise, except for (i) liabilities and obligations in the respective amounts reflected or reserved against in the consolidated balance sheet as of the Audit Date included in the Company Financial Statements or (ii) liabilities and obligations incurred in the ordinary course of business since the Audit Date which, individually or in the aggregate, have not had and would not have a Material Adverse Effect. As of the Closing Time, neither the Company nor any of its Subsidiaries will have any liability unrelated to the business or operations conducted by the Company and its Subsidiaries. As of the date hereof, Nassau Finance has not conducted any operations or activities and as of the Closing Time, it will not have conducted any operations or activities other than entering into this Agreement. 48 (b) Except as set forth in Schedule 4.07(b), (i) since the Audit Date ---------------- there has been no change in the business, management, operations, condition (financial or otherwise), assets or prospects of the Company or its Subsidiaries except for changes that, individually or in the aggregate, have not had or would not have a Material Adverse Effect and (ii) there are no facts known to the Company that have had or would have a Material Adverse Effect. (c) The information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of the Company to each of the Purchasers in connection with the negotiation, preparation or delivery of this Agreement and the other Transaction Documents or included herein or therein or delivered pursuant hereto or thereto, when taken as a whole do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. All written information furnished after the date hereof by the Company to each of the Purchasers in connection with this Agreement and the other Transaction Documents and the Transactions will be, taken as a whole, true, complete and accurate in every material respect, or (in the case of projections) based on reasonable estimates, on the date as of which such information is stated or certified (it being recognized that projections as to future events are not to be viewed as fact, and that the actual results may differ from projected results). 4.08. No Actions or Proceedings. Except as set forth in Schedule -------------------------------- -------- 4.08, there are no legal or governmental actions, suits or proceedings pending - ---- or, to the best of the Company's knowledge, threatened against or affecting the Company, any of the Company's Subsidiaries, any of their respective directors or officers (in their capacities as such) or any of their respective properties or assets or to prohibit, delay or materially restrict the consummation of any of the Transactions or the other transactions contemplated by this Agreement and the other Transaction Documents. To the best of the Company's knowledge, no Governmental Authority has notified the Company or any of its Subsidiaries of an intention to conduct any audit, investigation or other review with respect to the Company or any of its Subsidiaries. 4.09. Title to Properties. Except as set forth in Schedule 4.09, each -------------------------- ------------- of the Company and its Subsidiaries has (a) good and marketable title to and fee simple ownership of, or a valid and subsisting leasehold interest in, all of its real property, and (b) good title to, or a valid and subsisting leasehold interest in, all of its equipment and other personal property, in each case free and clear of all Liens, except Permitted Liens. Each of the Company and its Subsidiaries have paid or discharged, or reserved for, all lawful claims which, if unpaid, might become a Lien (other than a Permitted Lien) against any property or assets of the Company or any of its Subsidiaries. 4.10. Intellectual Property Rights. Except as set forth in Schedule ----------------------------------- -------- 4.10, each of the Company and its Subsidiaries owns or possesses all - ---- Intellectual Property reasonably necessary to conduct its businesses as now conducted, except where the expiration or loss of any of such Intellectual Property, individually or in the aggregate, would not have a Material Adverse Effect. To the best knowledge of the Company, (a) there is no infringement of, or conflict with, such Intellectual Property by any third party and (b) the conduct of their businesses as currently conducted do not infringe or conflict with any Intellectual Property of any third party, in each case other than any such infringements or conflicts which, individually or in the aggregate, have not had or would not have a Material Adverse Effect. 49 4.11. Taxes. Except as set forth in Schedule 4.11: ------------ ------------- (a) all Tax Returns that are required to be filed at or before the Closing Time by or with respect to the Company or any of its Subsidiaries, have been or will be timely filed at or before the Closing Time, and all such Tax Returns are or will be true and complete in all material respects; (b) all Taxes of the Company and each Subsidiary have been or will be timely paid in full; (c) adequate provision has been made for the payment of all Taxes for which the Company or any of its Subsidiaries may be liable that are not yet due and payable; (d) the Tax Returns referred to in clause (a) have been examined by the Internal Revenue Service or the appropriate state, local or foreign taxing authority or the period for assessment of the Taxes in respect of which such Tax Returns were required to be filed has expired; (e) there have been no deficiencies asserted or assessments made against the Company or any Subsidiary in respect of Taxes that have not yet been paid in full or finally settled; (f) no examination or audit of the Company or any Subsidiary by any taxing authority is presently being conducted, pending or proposed in writing; (g) no waivers of statutes of limitation have been given by or requested with respect to any Taxes of the Company or any of its Subsidiaries; (h) none of the Company or any of its Subsidiaries will be required to make, or has agreed to make an adjustment under Section 481 of the Code (or any similar provision of state, local or foreign law); (i) there are no Liens on any of the assets of the Company or any of its Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Tax; (j) neither the Company nor any of its Subsidiaries has ever been a member of an affiliated, combined, consolidated or unitary Tax group for purposes of filing any Tax Return, other than a group of which it is currently a member; (k) no closing agreements, private letter rulings, technical advance memoranda or similar agreement or rulings have been entered into or issued by any taxing authority with respect to the Company or any of its Subsidiaries; (l) to the best knowledge of the Company, except for Nassau Finance, neither the Company nor any of the Subsidiaries is treated as a corporation for U.S. federal income tax purposes; 50 (m) there are no tax sharing agreements or arrangements to which the Company or any Subsidiary is a party; (n) neither the Company nor any of its Subsidiaries has ever been a "United States real property holding corporation", within the meaning of Section 897 of the Code; and (o) to the best knowledge of the Company, any interest and original issue discount with respect to the Notes will be deductible in full as any such interest and original issue discount accrues or accretes, as the case may be, other than being subject to the possible application of Sections 163(e)(5) and 163(i) of the Code. 4.12. ERISA and Foreign Employee Benefit Matters. No ERISA Event has ------------------------------------------------- occurred or is reasonably expected to occur. The present value of all accumulated benefit obligations of all underfunded Pension Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $1.0 million the fair market value of the assets of all such underfunded Pension Plans. Each ERISA Entity is in compliance in all material respects with the presently applicable provisions of ERISA and the Code with respect to each Employee Benefit Plan. Using actuarial assumptions and computation methods consistent with subpart 1 of subtitle E of Title IV of ERISA, the aggregate liabilities or any of each ERISA Entity to all Multiemployer Plans in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Multiemployer Plan, would not reasonably be expected to result in a Material Adverse Effect. No Company or any ERISA Entity maintains or has contributed to a Foreign Plan. 4.13. Private Offering; No Integration or General Solicitation. --------------------------------------------------------------- (a) Subject to compliance by the Purchasers with the representations and warranties set forth in Section 5 hereof and with the procedures set forth in Sections 9 and 10 hereof, it is not necessary in connection with the offer, sale and delivery of the Securities to the Purchasers and to any Person to whom any Purchaser sells any of such Securities (each, a "Subsequent Purchaser") in -------------------- the manner contemplated by this Agreement to register the Securities under the Securities Act, or, in the case of the Notes, until such time as the Exchange Notes are issued or the Notes or Exchange Notes are otherwise registered pursuant to an effective registration statement under the Securities Act, to qualify an indenture relating to the Notes or Exchange Notes under the TIA. (b) The Company has not, directly or indirectly, offered, sold or solicited any offer to buy and will not, directly or indirectly, offer, sell or solicit any offer to buy, any security of a type or in a manner which would be integrated with the sale of the Securities and require the Securities to be registered under the Securities Act. None the Company, or its Affiliates or any Person acting on its or any of their behalf (other than the Purchasers, as to whom the Company make no representation or warranty) has engaged or will engage in any form of general solicitation or general advertising (within the meaning of Rule 502(c) under the Securities Act) in connection with the offering of the Securities. With respect to the Securities, if any, sold in 51 reliance upon the exemption afforded by Regulation S: (i) none of the Company, its Affiliates or any Person acting on its or their behalf (other than the Purchasers, as to whom the Company makes no representation or warranty) has engaged or will engage in any directed selling efforts within the meaning of Regulation S and (ii) each of the Company and its Affiliates and any Person acting on its or their behalf (other than the Purchasers, as to whom the Company make no representation or warranty) has complied and will comply with the offering restrictions set forth in Regulation S. 4.14. Eligibility for Resale Under Rule 144A. The Securities are --------------------------------------------- eligible for resale pursuant to Rule 144A and will not, at the Closing Time, be of the same class as securities listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted on a U.S. automated interdealer quotation system. 4.15. Status Under Certain Statutes. Neither the Company nor any of ------------------------------------ its Subsidiaries is or, after receipt of payment for the Securities and the consummation of the other transactions contemplated by the Transaction Documents, will be (a) subject to regulation under the Public Utility Holding Company Act of 1935, as amended ("PUHCA"), the Federal Power Act or the ----- Interstate Commerce Act, each as amended, (b) an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended, or controlled by such a company, or (c) a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary" or a "holding company", within the meaning of PUHCA. 4.16. Insurance. Each of the Company and its Subsidiaries are insured ---------------- by financially sound institutions with policies in such amounts and with such deductibles and covering such risks as are generally deemed adequate for their businesses including, but not limited to, policies covering real and personal property owned or leased by the Company and its Subsidiaries against theft, damage, destruction and acts of vandalism, except where failure to maintain such insurance would not have a Material Adverse Effect. 4.17. Use of Proceeds; Margin Regulations. The Company will utilize ------------------------------------------ the proceeds from the sale of the Securities, together with proceeds from borrowings under the Bank Credit Agreement, to effect the Recapitalization, such that, immediately after giving effect thereto, the consolidated indebtedness of the Company and its Restricted Subsidiaries and the outstanding equity interests of the Company shall be as contemplated by Section 3.05 hereof. No part of the proceeds from the sale of the Securities hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U, or for the purpose of buying or carrying or trading in any securities. Margin stock does not constitute more than 5% of the value of the consolidated assets of the Company and its Subsidiaries and the Company has no present intention that margin stock will constitute more than 5% of the value of such assets. As used in this Section, the terms "margin stock" and "purpose of buying or carrying" shall have the meanings assigned to them in Regulation U. 4.18. Existing Indebtedness; Future Liens. Schedule 4.18 sets forth a ------------------------------------------- ------------- complete and correct list of all Indebtedness of the Company and its Subsidiaries that will be outstanding immediately after the consummation of the Transactions to be completed on or prior to the Closing Time. At the Closing Time, after consummation of the Transactions, the consolidated 52 Indebtedness of the Company and its Subsidiaries will not exceed $111.0 million and the sole Indebtedness of the Company will be represented by the Notes, amounts outstanding under the Bank Credit Agreement and certain capital leases of the Company and its Subsidiaries as set forth on Schedule 4.18, and the ------------- 97,000 LP Units held by Nassau Broadcasting Company shall no longer be entitled to the First Contingent Payment, the Second Preferred Amount or any form of preferred return in respect of the Company's operating results, proceeds from dispositions, upon liquidation or otherwise. Neither the Company nor any Subsidiary of the Company is in default, and no waiver of default is currently in effect, in the payment of the principal of or interest on any Indebtedness of the Company or such Subsidiary and no event or condition exists with respect to any Indebtedness of the Company or any Subsidiary of the Company that would permit (or that with notice, lapse of time or both, would permit) any Person to cause such Indebtedness to become due and payable before its Stated Maturity or before its regularly scheduled dates of payment. Neither the Company nor any of its Subsidiaries has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property or assets, whether now owned or hereafter acquired, to be subject to a Lien that would be prohibited by this Agreement if incurred after the first issuance of the Notes. 4.19A. Compliance with Laws; Permits. Except as disclosed in Schedule ------------------------------------- -------- 4.19A and except as would not, individually or in the aggregate, result in a - ----- Material Adverse Effect: (a) each of the Company and each of its Subsidiaries has complied, and is in compliance, in all material respects with all Applicable Laws and has all Permits material to, and necessary in, the conduct of its business as currently conducted (all of which such Permits are listed on Schedule 4.19 together with their expiration dates) and all such Permits are in full force and effect; and (b) no violations have been recorded in respect of any such Permits, and no proceeding is pending or, to the best knowledge of the Company, threatened to revoke or limit any Permit, except for violations and proceedings which, individually or in the aggregate, have not and would not have a Material Adverse Effect. 4.19B. Environmental Matters; Environmental Investigations. Except as ------------------------------------------------------------ disclosed in Schedule 4.19B and except as would not, individually or in the aggregate, result in a Material Adverse Effect: (a) (i) each of the Company and its Subsidiaries are in compliance with, and are not subject to liability under, any applicable Environmental Laws and to the best knowledge of the Company, there are no Environmental Laws, including such Laws which have been formally proposed for public comment, which could reasonably be expected to result in material expenditures by the Company or its Subsidiaries or to interfere in any material way with current or projected operations of the Company; (ii) neither the Company, or to the knowledge of the Company, any of its predecessors in interest, has disposed of, arranged for the disposal or treatment of or otherwise released Hazardous Materials at any time with respect to which the Company or any of it subsidiaries has received an Environmental Claim; (iii) to the best knowledge of the Company, no Real Property now or formerly owned leased or operated by the Company or any of its subsidiaries or any of their respective predecessors in interest, is listed or 53 proposed for listing on the National Priorities List under CERCLA or included on any similar lists maintained by any Governmental Authority; (iv) to the best knowledge of the Company or any of its Subsidiaries, there are no past or present events, conditions, activities, practices or actions, or any agreements, judgements, decrees or orders by which the Company or any of its Subsidiaries is bound, which could reasonably be expected to prevent the Company's or any of its Subsidiaries' compliance with any Environmental Law, or which could reasonably be expected to give rise to any liability of the Company or any of its Subsidiaries under any Environmental Law; and (v) neither the Company nor any of its Subsidiaries is subject to any Proceeding alleging the violation of, or liability under, any Environmental Law or has received any Environmental Claim and, to the knowledge of the Company, no such Proceeding or Environmental Claim is threatened; and (b) As of the Issue Date, all material environmental investigations, studies, audits or assessments in the possession, custody or control of the Company or any of its Subsidiaries relating (i) to the current or prior business or operations of the Company, its subsidiaries or any of their respective predecessors in interest or (ii) to any Property now or previously owned, operated, leased or used by the Company it Subsidiaries or any of their respective predecessors in interest have been made available to the Purchasers. 4.20. Solvency. The Company and its Subsidiaries are, and after ---------------- giving effect to the Transactions will be, Solvent. 4.21. Affiliate Transactions. Except as disclosed in Schedule 4.21 ------------------------------ ------------- or, with respect to transactions occurring at or after the Closing Time, as permitted by Section 8.06 hereof: (a) there is no Indebtedness between the Company or any of its Subsidiaries, on the one hand, and any officer, stockholder, partner, director or Affiliate (other than the Company or any of its Subsidiaries) of the Company, on the other, (b) no such officer, stockholder, partner, director or Affiliate provides or causes to be provided any assets, services or facilities to the Company or any of its Subsidiaries which, individually or in the aggregate, are material to the business, management, operations, affairs, condition (financial or otherwise), assets, property, prospects or results of operations of the Company and its Subsidiaries, taken as whole, (c) neither the Company nor any of its Subsidiaries provides or causes to be provided any assets, services, or facilities to any such officer, stockholder, partner, director or Affiliate which, individually or in the aggregate, are material to the business, management, operations, affairs, condition (financial or otherwise), assets, property, prospects or results of operations of the Company and its Subsidiaries, and (d) neither the Company nor any Subsidiary beneficially owns, directly or indirectly, any investment in or issued by any such officer, stockholder, partner, director or Affiliate. 4.22. Material Contracts. Schedule 4.22 contains a true, correct and -------------------------- ------------- complete list of all Material Contracts in effect at the Closing Time. Except as described on Schedule 4.22, as of the Closing Time each Material Contract is in full force and effect and no material defaults enforceable against the Company or any of its Subsidiaries currently exist thereunder. To the best knowledge of the Company and its Subsidiaries, no party to any Material Contract intends to terminate such Material Contract. 54 4.23. No Changes to Applicable Law. To the best knowledge of the ------------------------------------ Company, no changes to Applicable Law affecting itself or any of its Subsidiaries have occurred since the Audit Date or are currently pending or threatened, in each case other than those which have not had and would not reasonably be expected to have a Material Adverse Effect. 4.24. Fees. All fees and other expenses payable in connection with ------------ the consummation of the Transactions to be consummated on or prior to the Closing Time by the Company or any of its Subsidiaries are disclosed in a letter of even date herewith from the Company to Merrill Lynch on behalf of the Purchasers. 4.25. Brokerage Fees. Except as disclosed on Schedule 4.25, neither ---------------------- ------------- the Company nor any of the Company's Subsidiaries has paid, or is obligated to pay, to any Person any brokerage or finder's fees in connection with the transactions contemplated hereby or by any other Transaction Documents. 4.26. Absence of Labor Dispute. Except as disclosed on Schedule 4.26, ------------------------------- ------------- no labor dispute with the employees of the Company or any of its Subsidiaries exists or, to the best knowledge of the Company, is imminent, and the Company is not aware of any existing or imminent labor disturbance by the employees, principal suppliers, manufacturers, customers or contractors of the Company or any of its Subsidiaries, which, in any case, would have a Material Adverse Effect. 4.27. FCC Matters. ------------------- (a) Company Stations. ---------------- (i) Schedule 4.27(a) hereto contains a complete list of the FCC ---------------- Authorizations of the Company and its Subsidiaries. Such list correctly sets forth the termination date of each such FCC Authorization. Each such FCC Authorization that is material to the operation of the business of any Company Station is validly issued and in full force and effect, and constitutes in all material respects, all of the authorizations from the FCC necessary under the Communications Act for the operation of Company's business (including, without limitation, the Company Stations) in the same manner as it is presently conducted and as proposed to be conducted. The Company has taken all actions and performed all of its obligations that are necessary to maintain such FCC Authorizations for the Company Stations without adverse modification or impairment, and complete and correct copies of the FCC Authorizations of each Company Station have been delivered to the Purchasers. Except as expressly set forth on Schedule 4.27(a), no event has occurred which (i) results in, or after ---------------- notice or lapse of time or both would result in, revocation, suspension, adverse modification, nonrenewal, impairment or termination of or any order of forfeiture with respect to, any FCC Authorization for a Company Station, or (ii) materially and adversely affects or in the future may (so far as the Company can now reasonably foresee) materially adversely affect any of the rights of the Company thereunder. No condition has been imposed by the FCC as part of any of the FCC Authorizations, which is not set forth on the face thereof as issued by the FCC or contained in the rules and regulations of the FCC applicable generally to the stations of the type of the Company Stations. 55 (ii) Except as expressly set forth in Schedule 4.27(a), the Company ---------------- is not a party to and has no knowledge of any investigation, notice of apparent liability, violation, forfeiture or other order or complaint issued by or before any court or regulatory body, including the FCC, or of any other proceedings (other than proceedings relation to the radio industry generally) which would reasonably be expected to in any manner threaten or adversely affect the validity or continued effectiveness of the FCC Authorizations for any Company Station. The Company has no reason to believe (other than there being no legal assurance thereof) that the FCC Authorizations for the Company Stations listed and described in Schedule 4.27(a) will not be renewed in the ordinary course. ---------------- The Company has filed in a timely manner all material reports (including, but not limited to, ownership reports), applications, documents, instruments and information required to be filed by it pursuant to applicable rules and regulations or requests of every regulatory body having jurisdiction over any of its FCC Authorizations for a Company Station. (iii) Except as expressly set forth in Schedule 4.27(a), to the ---------------- Company's knowledge, none of the facilities used in connection with the Company's radio broadcasting operations (including, without limitation, the transmitter and tower sites owned or used by the Company in connection with the operation of the Company Stations) violates in any material respect the provisions of any applicable building codes, fire regulations, building restrictions or other governmental ordinances, orders, or regulations and each such facility is zoned so as to permit the commercial uses intended by the owner or occupier thereof and there are no outstanding variances or special use permits materially affecting any of the facilities or the uses thereof. (iv) The Company has duly and timely filed all material filings which are required to be filed by it under the Communications Act. (v) The execution, delivery and performance of the Transaction Documents by the Company and each other party whose execution and delivery is necessary for the effectiveness thereof do not require the approval of the FCC. The execution, delivery and performance of the Transaction Documents will not result in any violation of the Communications Act, and will not cause any forfeiture or impairment of any of the FCC Authorizations issued for the operation of any of the Company Stations. (b) LMA Stations. ------------ (i) The Time Brokerage Agreements are in full force and effect and are in compliance in all material respects with the Communications Act. (ii) To the best of the Company's knowledge after due inquiry: Schedule 4.27(b) hereto contains a complete listing of all FCC Authorizations - ---------------- held by each LMA Licensee for its LMA Stations; these FCC Authorizations constitute all licenses, construction permits, and authorizations required under the Communications Act to permit each LMA Licensee to own, control, manage and operate its LMA Stations as they are currently being owned, controlled, managed and operated; Schedule 4.27(b) correctly sets forth the termination date of each ---------------- such FCC Authorization; each such FCC Authorization that is materially necessary to the operation of the business of each LMA Licensee is validly issued and in full force and effect, and constitutes 56 in all material respects, all of the authorizations from the FCC necessary for the operation of the LMA Licensee's business with respect to its LMA Stations in the same manner as they presently are being conducted and as they are proposed to the conducted; each LMA Licensee has taken all actions and performed all of its obligations that are necessary to maintain such FCC Authorizations without adverse modification or impairment, and complete and correct copies of the FCC Authorizations of each LMA Licensee have been delivered to the Purchasers; except as expressly set forth on Schedule 4.27(b), no event has occurred which ---------------- (i) results in, or after notice or lapse of time or both would result in, revocation, suspension, adverse modification, nonrenewal, impairment or termination of or any order of forfeiture with respect to, any FCC Authorization for any LMA Station or (ii) materially and adversely affects or in the future may (so far as now can reasonably be foreseen) materially adversely affect any of the rights of any LMA Licensee thereunder, and no condition has been imposed by the FCC as part of any of the FCC Authorizations for any LMA Station, or on the grant of the renewal for such FCC Authorizations, which is not set forth on the face thereof as issued by the FCC or contained in the rules and regulations of the FCC applicable generally to stations of the type, nature, class or location of the LMA Stations. (iii) To the best of the Company's knowledge after due inquiry: except as expressly set forth in Schedule 4.27(b), no LMA Licensee is a party to ---------------- any investigation, notice of apparent liability, violation, forfeiture or other order or complaint issued by or before any court or regulatory body, including the FCC, or of any other proceedings (other than proceedings relating to the radio industry generally) which could in any manner threaten or adversely affect the validity or continued effectiveness or its FCC Authorizations; the FCC has granted renewals of the FCC Authorizations for each LMA Station in the ordinary course; and each LMA Licensee has filed in a timely manner all material reports, applications, documents, instruments and information required to be filed by it pursuant to applicable rules and regulations or requests of every regulatory body having jurisdiction over any of its FCC Authorizations. (iv) To the best of the Company's knowledge after due inquiry: except as expressly set forth in Schedule 4.27(b), none of the facilities used ---------------- in connection with any LMA Licensee's radio broadcasting operations that such LMA Licensee owns or uses in connection with the operation of its LMA Station, violates in any material respect the provisions of any applicable building codes, fire regulations, building restrictions or other governmental ordinances, orders, or regulations and each such facility is zoned so as to permit the commercial uses intended by the owner or occupier thereof and there are no outstanding variances or special use permits materially affecting any of the facilities or the uses thereof. (v) To the best of the Company's knowledge after due inquiry: each Ownership Report filed by each LMA Licensee with the FCC is true, correct and complete in all material respects and there have been no changes in such LMA Licensee's ownership since the filing of the most recent Ownership Reports for the LMA Stations of such LMA Licensee. (vi) To the best of the Company's knowledge after due inquiry: the execution, delivery and performance of the Transaction Documents in accordance with their terms will not result in any violation of the Communications Act, and will not cause any forfeiture or impairment of any of the FCC Authorizations issued for the operation of any LMA Station. 57 ARTICLE 5 --------- REPRESENTATIONS OF THE PURCHASERS --------------------------------- Each Purchaser severally and not jointly represents and warrants to the Company as of the date hereof and as of the Closing Time as follows: 5.01. Purchase for Investment. ------------------------------- (a) Such Purchaser is acquiring the Securities for its own account, for investment and not with a view to any distribution thereof within the meaning of the Securities Act. (b) Such Purchaser understands that (i) the Securities have not been registered under the Securities Act and are being issued by the Company in transactions exempt from the registration requirements of the Securities Act and (ii) the Securities may not be offered or sold except pursuant to an effective registration statement under the Securities Act or pursuant to an applicable exemption from registration under the Securities Act. (c) Such Purchaser further understands that the exemption from registration afforded by Rule 144 (the provisions of which are known to such Purchaser) promulgated under the Securities Act depends on the satisfaction of various conditions, and that, if applicable, Rule 144 may afford the basis for sales only in limited amounts. (d) Such Purchaser did not, and is not obligated to, pay any broker or finder in connection with the transactions contemplated in this Agreement. (e) Such Purchaser is a Qualified Institutional Buyer or an Accredited Investor. ARTICLE 6 --------- COVENANTS TO PROVIDE INFORMATION -------------------------------- The Company covenants and agrees with each Purchaser that until the principal amount of (and premium, if any, on) all the Notes, and all interest, Special Interest and other obligations hereunder in respect thereof, shall have been paid in full, and while any Warrant LP Units or Warrant Shares shall remain outstanding: 6.01. Reports to Holders. Commencing upon the earlier of (i) the ------------------------- consummation of a Public Equity Offering, to the extent the Excess IPO Proceeds are insufficient to redeem all of the Notes, or (ii) six (6) months after the Issue Date, the Company shall: (a) SEC Reports. Whether or not the Company is then required to file ---------------- reports with the Commission, file with the Commission all such annual reports, quarterly reports, current reports and other documents that the Company would be required to file if it were subject to Section 13(a) or 15(d) under the Exchange Act. 58 The Company will also be required (i) to supply to each Holder without cost to such Holder, copies of such reports and other documents within 15 days after the date on which the Company files such reports and documents with the Commission or the date on which the Company would be required to file such reports and documents if the Company were so required and (ii) if filing such reports and documents with the Commission is not accepted by the Commission or is prohibited under the Exchange Act, to supply at the Company's cost copies of such reports and documents to any prospective Holder of Notes promptly upon written request. (b) Chief Financial Officer Certificates. Concurrently with the ----------------------------------------- delivery of the reports referred to in subsection (a) of this Section 6.01, deliver an Officers' Certificate (of which one of the signatories shall be the chief financial officer or the Director of Accounting of the Company) (i) stating that, to the best of such Officers' knowledge after due inquiry, each of the Company and its respective Subsidiaries has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Transaction Documents to be observed, performed or satisfied by it, and in that such Officer has obtained no knowledge of any Default or Event of Default, except as specified in such Officers' Certificate, and (ii) showing in detail as of the end of the related fiscal period the figures and calculations supporting such statement in respect of Sections 8.02, 8.04 and 8.05 of this Agreement or, if applicable, the corresponding sections of the Indenture. (c) Other Information. Promptly upon their becoming available, ---------------------- deliver copies of all financial statements, reports, notices and proxy statements sent to its securityholders or made available generally by the Company or any of its Subsidiaries and all regular and periodic reports and all registration statements and final prospectuses, if any, filed by the Company or any of its Subsidiaries with any securities exchange or with the Commission or any Governmental Authority succeeding to any of its functions and, prior to a Public Equity Offering and promptly upon request, such additional financial and other information as any Holder may from time to time reasonably request. (d) Notice of Default or Event of Default. Promptly, but in any ------------------------------------------ event within three (3) Business Days, after any officer of the Company becomes aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any other action with respect to a claimed Default or Event of Default, deliver a written notice thereof to the Noteholders specifying the nature and existence thereof and what action the Company is taking or proposes to take with respect thereto. (e) Additional Information to Holders of Other Indebtedness. ------------------------------------------------------------ Simultaneously with the furnishing of such information to any other holder of Indebtedness of the Company or any of its Subsidiaries, deliver (i) copies of all other financial statements, reports or projections with respect to the Company or its Subsidiaries which are broader in scope or on a more frequent basis than the Company is otherwise required to provide under this Agreement and (ii) copies of all studies, reviews, reports or assessments relating to environmental matters that reveal circumstances, events or other matters that would reasonably be expected to have a Material Adverse Effect. 59 (f) Original Issue Discount Information. Make information returns ----------------------------------- disclosing all original issue discount accruing with respect to the Notes as may be required by applicable law. ARTICLE 7 --------- OTHER AFFIRMATIVE COVENANTS --------------------------- The Issuers further covenant and agree with each Purchaser that until the principal amount of (and premium, if any, on) all the Notes, and all interest, Special Interest and other obligations hereunder in respect thereof, shall have been paid in full: 7.01. Payment of Principal, Premium and Interest. The Issuers shall ------------------------------------------ duly and punctually pay the principal of (and premium, if any, on) and all interest (including Special Interest) on the Notes in accordance with the terms of the Notes and this Agreement. The Issuers shall pay interest on overdue principal (including post- petition interest in a proceeding under any Bankruptcy Law), and interest on overdue interest (including Special Interest), to the extent lawful, at the rate specified in the Notes. 7.02. Preservation of Partnership Existence and Franchises. Subject ---------------------------------------------------- to Section 8 hereof, the Issuers will do or cause to be done all things necessary to preserve and keep in full force and effect the corporate or limited liability company (as applicable) or partnership existence, rights (charter and statutory) and franchises of themselves and each Restricted Subsidiary; provided, however, that, subject to the other provisions of this Agreement, the Issuers shall not be required to preserve any such right or franchise, or the existence of any Restricted Subsidiary, if the General Partner (so long as the Company is a partnership) or Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries as a whole and that the loss thereof is not disadvantageous in any material respect to the Holders. 7.03. Maintenance of Properties. The Issuers will cause all material ------------------------- properties owned by them or any Restricted Subsidiary or used or held for use in the conduct of its business or the business of any Restricted Subsidiary to be maintained and kept in good condition, repair and working order (except ordinary wear and tear) and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Issuers or any of their Restricted Subsidiaries from discontinuing the maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of their business or the business of any Restricted Subsidiary and not disadvantageous in any material respect to the Holders. 7.04. Taxes. ----- (a) Payment of Taxes. The Issuers will pay or discharge or cause to ---------------- be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and 60 governmental charges levied or imposed upon the Issuers or any Subsidiary or upon the income, profits or property of the Issuers or any Subsidiary and (b) all lawful claims for labor, materials and supplies, which, if unpaid, would by law become a lien (other than a Permitted Lien) upon the property of the Issuers or any Subsidiary; provided, however, that the Issuers shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. (b) Tax Returns. The Issuers and their Subsidiaries shall timely ----------- file or cause to be filed when due all material Tax Returns that are required to be filed by or with respect to the Issuers or their Subsidiaries and shall pay any Taxes due in respect of such Tax Returns. 7.05. Books, Records and Access. The Issuers and their Subsidiaries ------------------------- shall keep complete and accurate books and records of their transactions in accordance with good accounting practices on the basis of GAAP (including the establishment and maintenance of appropriate reserves). Prior to the effectiveness of an Exchange Offer Registration Statement or a Shelf Registration Statement and thereafter to the extent the Company is not in compliance with its obligations under the Indenture to file with the Commission all annual, quarterly and current reports required by the Exchange Act (whether or not the Company is obligated to report under the Exchange Act), if reasonably required in connection with any resale of Notes or Exchange Notes and upon reasonable notice, the Company shall, and shall cause its Subsidiaries to, subject to compliance with Applicable Laws and confidentiality obligations to third parties, give each Purchaser (to the extent that it holds Notes or Exchange Notes) and any Holder that (i) holds not less than 10% in aggregate principal amount of the then outstanding Notes and (ii) is not a competitor of the Company or any of its Subsidiaries in any material respect (and, in each case, any sales or placement agent or underwriter participating in such resale) and their authorized representatives reasonable access, in the presence of the management of the Company, during normal business hours to all contracts, books, records, personnel, offices and other facilities and properties of the Company and its Subsidiaries and their legal advisors, accountants and, to the extent available to the Company after the Company uses reasonable efforts to obtain them, the accountants' work papers, permit each Purchaser and such Holder (and any such sales or placement agent or underwriter) to make such copies and inspections thereof as such Purchaser or such Holder may reasonably request and furnish each Purchaser and such Holder (and any such sales or placement agent or underwriter) with such financial and operating data and other information with respect to the business and properties of the Company and its Subsidiaries as such Purchaser or such Holder (and any such sales or placement agent or underwriter) may from time to time reasonably request. Any such visits will be at the expense of such Purchaser or such Holder. 7.06. Compliance with Law. The Issuers shall, and shall cause each of ------------------- their Subsidiaries to, comply with all Applicable Laws and shall obtain and maintain, and shall cause each of its Subsidiaries to obtain and maintain, all Permits necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that any such non-compliance with Applicable Law or any failure to obtain or maintain such Permits, individually or in the aggregate, would not have a Material Adverse Effect. 61 7.07. Insurance. The Company shall, and shall cause its Subsidiaries --------- to, maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and business against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated, except where failure to maintain such insurance would not have a material adverse effect. 7.08. Offer to Repurchase upon Change of Control. ------------------------------------------ (a) If a Change in Control shall occur at any time, then each Holder of Notes shall have the right to require that the Issuers purchase, and the Issuers shall make an offer to purchase, from such Holder all of the Notes, in whole or in part and in integral multiples of $1,000 principal amount at Maturity, at a purchase price (the "Change in Control Purchase Price") in cash -------------------------------- in an amount equal to (i) 101% of the Accreted Value thereof as of the date of repurchase (the "Change in Control Purchase Date") if such date is on or before ------------------------------- May 1, 2005 and (ii) 101% of the principal amount at Maturity of the Notes, thereof plus accrued and unpaid cash interest, if any, to the Change in Control Purchase Date, if such date is after May 1, 2005, pursuant to the offer described in this Section 7.08 (the "Change in Control Offer") and the other ----------------------- procedures set forth in this Agreement. (b) Within 15 days following any Change in Control, the Issuers shall give written notice of such Change in Control Offer to each Holder by first-class mail, postage prepaid, at the address of such Holder appearing in the Security Register, stating, among other things, (i) the Change in Control Purchase Price and the Change in Control Purchase Date, which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed, or such later date as is necessary to comply with requirements under the Exchange Act or any applicable securities laws or regulations; (ii) that any Note not tendered will continue to accrete original issue discount and/or accrue interest, as the case may be; (iii) that, unless the Issuers default in the payment of the Change in Control Purchase Price, any Notes accepted for payment pursuant to the Change in Control Offer shall cease to accrete original issue discount and/or accrue interest, as the case may be, after the Change in Control Purchase Date; (iv) that Holders electing to have any Notes purchased pursuant to a Change in Control Offer shall be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" ---------------------------------- on the reverse of the Notes completed, to the Issuers or their designated agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change in Control Purchase Date; (v) that Holders shall be entitled to withdraw their election if the Issuers or their designated agent receives, not later than the close of business on the second Business Day preceding the Change in Control Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing its election to have such Notes purchased; (vi) that Holders whose Notes are being purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount at maturity or an integral multiple thereof; (vii) the instructions that the Holders must follow in order to tender their Notes; and (viii) the circumstances and relevant facts regarding such Change in Control. 62 (c) The Issuers shall comply to the extent applicable with the requirements of the tender offer rules, including Rule 14e-1 under the Exchange Act, and any other applicable securities laws and regulations in connection with a Change in Control Offer. (d) The Issuers will not, and will not permit any Subsidiary to, create or permit to exist or become effective any restriction (other than restrictions existing under Indebtedness as in effect on the date of this Agreement) that would materially impair the ability of the Issuers to make a Change in Control Offer to purchase the Notes or, if such Change in Control Offer is made, to pay for the Notes tendered for purchase. 7.09. Offer to Purchase by Application of Excess Proceeds. --------------------------------------------------- (a) In the event that, pursuant to Section 8.05 hereof, the Issuers ------------ shall be required to commence an Excess Proceeds Offer, they shall follow the procedures specified in this Section 7.09. (b) Within 15 days after the obligation of the Company to make an Excess Proceeds Offer arises, the Issuers shall give written notice of such Excess Proceeds Offer to each Holder of Notes by first-class mail, postage prepaid, at the address of such Holder appearing in the Note Register, stating, (i) the Excess Proceeds Offer Price and the date of the purchase of Notes pursuant to the Excess Proceeds Offer (the "Excess Proceeds Offer Date"), which -------------------------- shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed, or such later date as is necessary to comply with requirements under the Exchange Act or any applicable securities laws or regulations; (ii) that any Note not tendered will continue to accrue interest; (iii) that, unless the Company defaults in the payment of the Excess Proceeds Offer Price, any Notes accepted for payment pursuant to the Excess Proceeds Offer shall cease to accrue interest after the Excess Proceeds Offer Date; (iv) that Holders electing to have any Notes purchased pursuant to an Excess Proceeds Offer shall be required to surrender the Notes, with the form entitled "Option ------ of Holder to Elect Purchase" on the reverse of the Notes completed, to the - --------------------------- Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Excess Proceeds Offer Date; (v) that Holders shall be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Excess Proceeds Offer Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount at Maturity of Notes delivered for purchase, and a statement that such Holder is withdrawing its election to have such Notes purchased; (vi) that Holders whose Notes are being purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount at Maturity or an integral multiple thereof; (vii) the instructions that the Holders of Notes must follow in order to tender their Notes; and (viii) the circumstances and relevant facts regarding such Excess Proceeds Offer. (c) The Issuers shall comply to the extent applicable with the requirements of the tender offer rules, including Rule 14e-1 under the Exchange Act, and any other applicable securities laws and regulations in connection with an Excess Proceeds Offer. 7.10. Offer to Purchase In Event of Non-Consummation of Aurora -------------------------------------------------------- Acquisition. ----------- 63 (a) In the event that the Aurora Acquisition has not been consummated within 180 days after the Issue Date, the Issuers shall be obligated to make an offer to purchase (the "Aurora Offer to Purchase"), at a price of ------------------------ 101% of the Accreted Value thereof (the "Aurora Offer Purchase Price"), plus --------------------------- accrued and unpaid interest, if any, Notes having an aggregate Accreted Value of 50% of the total Accreted Value of the Notes then outstanding, in accordance with the procedures specified in this Section 7.10. (b) Within 15 days after the obligation of the Issuers to make an Aurora Offer to Purchase arises, the Issuers shall give written notice of such Aurora Offer to Purchase to each Holder of Notes by first-class mail, postage prepaid, at the address of such Holder appearing in the Note Register, stating, (i) the Aurora Offer Purchase Price and the date of the purchase of Notes pursuant to the Aurora Offer to Purchase (the "Aurora Offer Purchase Date"), -------------------------- which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed, or such later date as is necessary to comply with requirements under the Exchange Act or any applicable securities laws or regulations; (ii) that any Note not tendered will continue to accrue interest; (iii) that, unless the Company defaults in the payment of the Aurora Offer Purchase Price, any Notes accepted for payment pursuant to the Aurora Offer to Purchase shall cease to accrue interest after the Aurora Offer Purchase Date; (iv) that Holders electing to have any Notes purchased pursuant to an Aurora Offer to Purchase shall be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes ---------------------------------- completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Aurora Offer Purchase Date; (v) that Holders shall be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Aurora Offer Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount at Maturity of Notes delivered for purchase, and a statement that such Holder is withdrawing its election to have such Notes purchased; (vi) that Holders whose Notes are being purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount at Maturity or an integral multiple thereof; (vii) the instructions that the Holders of Notes must follow in order to tender their Notes; and (viii) the circumstances and relevant facts regarding such Aurora Offer to Purchase. (c) The Issuers shall comply to the extent applicable with the requirements of the tender offer rules, including Rule 14e-1 under the Exchange Act, and any other applicable securities laws and regulations in connection with an Aurora Offer to Purchase. 7.11. Offer to Purchase In Event Banks Decline Mandatory Prepayment ------------------------------------------------------------- of Proceeds of Certain Debt Issuances. (a) In the event of a Qualified Debt - ------------------------------------- Issuance as to which the Lenders have exercised their election under Section 2.11 of the Bank Credit Agreement not to require the application of the proceeds therefrom to the prepayment of loans or reduction of commitments under the Bank Credit Agreement, the Issuers shall be obligated to make an offer to purchase Notes from Holders (the "Excess Debt Issuance Proceeds Offer to Purchase") in an ----------------------------------------------- amount equal to the portion of such proceeds not applied to such prepayment, at a purchase price per Note (the "Excess Debt Issuance Proceeds Offer Price"), of ----------------------------------------- (i) 100% of the Accreted Value thereof, plus accrued and unpaid interest, if any, as of the date of repurchase if such date is on or before May 1, 2005 and (ii) 100% of the principal amount thereof, plus accrued and unpaid cash 64 interest, if any, to the date of repurchase if such date is after May 1, 2005, in accordance with the procedures specified in this Section 7.11. (b) Within 15 days after the obligation of the Issuers to make an Excess Debt Issuance Proceeds Offer to Purchase arises, the Issuers shall give written notice of such Excess Debt Issuance Proceeds Offer to Purchase to each Holder of Notes by first-class mail, postage prepaid, at the address of such Holder appearing in the Security Register, stating, (i) the Excess Debt Issuance Proceeds Offer to Purchase and the date of the purchase of Notes pursuant to the Excess Debt Issuance Proceeds Offer to Purchase (the "Excess Debt Issuance -------------------- Proceeds Offer to Purchase Date"), which shall be a Business Day no earlier than - ------------------------------- 30 days nor later than 60 days from the date such notice is mailed, or such later date as is necessary to comply with requirements under the Exchange Act or any applicable securities laws or regulations; (ii) that any Note not tendered will continue to accrue interest; (iii) that, unless the Company defaults in the payment of the Excess Debt Issuance Proceeds Offer Purchase Price, any Notes accepted for payment pursuant to the Excess Debt Issuance Proceeds Offer to Purchase shall cease to accrue interest after the Excess Debt Issuance Proceeds Offer Purchase Date; (iv) that Holders electing to have any Notes purchased pursuant to an Excess Debt Issuance Proceeds Offer to Purchase shall be required to surrender the Notes, with the form entitled "Option of Holder to Elect ------------------------- Purchase" on the reverse of the Notes completed, to the Paying Agent at the - -------- address specified in the notice prior to the close of business on the third Business Day preceding the Excess Debt Issuance Proceeds Offer to Purchase Date; (v) that Holders shall be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Excess Debt Issuance Proceeds Offer to Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount at Maturity of Notes delivered for purchase, and a statement that such Holder is withdrawing its election to have such Notes purchased; (vi) that Holders whose Notes are being purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount at Maturity or an integral multiple thereof; (vii) the instructions that the Holders of Notes must follow in order to tender their Notes; and (viii) the circumstances and relevant facts regarding such Excess Debt Issuance Proceeds Offer to Purchase. To the extent that the aggregate Excess Debt Issuance Proceeds Offer Price that would be payable in respect of Notes tendered pursuant to an Excess Proceeds Debt Issuance Offer is less than the Excess Debt Issuance Proceeds available for such offer, the Company may use such deficiency for general corporate purposes. If the aggregate Excess Proceeds Debt Issuance Offer Price of Notes validly tendered and not withdrawn by Holders thereof exceeds the Excess Debt Issuance Proceeds, Notes to be purchased will be selected on a pro rata basis. (c) The Issuers shall comply to the extent applicable with the requirements of the tender offer rules, including Rule 14e-1 under the Exchange Act, and any other applicable securities laws and regulations in connection with an Excess Debt Issuance Proceeds Offer to Purchase. 7.12. Further Assurances. Issuers shall, upon the request of the ------------------ Noteholders, execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the provisions of this Agreement. 65 ARTICLE 8 --------- NEGATIVE COVENANTS ------------------ The Company hereby covenants and agrees with each Purchaser that until the principal amount of (and premium, if any, on) all the Notes, and all interest, Special Interest and other obligations hereunder in respect thereof, shall have been paid in full: 8.01. Stay, Extension and Usury Laws. The Issuers covenant (to the ------------------------------ extent that they may lawfully do so) that they shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of their obligations under the Notes or this Agreement, and the Issuers hereby expressly waive all benefit or advantage of any such law, and covenant that they shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Noteholders, but shall suffer and permit the execution of every such power as though no such law has been enacted. 8.02. Restricted Payments. ------------------- (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, take any of the following actions: (i) declare or pay any dividend on, or make any other distribution or payment on or in respect of, any of its Equity Interests of the Company or any Restricted Subsidiary or any payment to direct or indirect Holders (in their capacities as such) of Equity Interests of the Company or any Restricted Subsidiary, Qualified Equity Interests (other than dividends or distributions payable solely in Qualified Equity Interests); (ii) purchase, redeem or otherwise acquire or retire for value, directly or indirectly, any Equity Interests or any Equity Interests of any of its Affiliates (other than Equity Interests of any Wholly Owned Restricted Subsidiary); (iii) make any principal payment on, or repurchase, redeem, defease or otherwise acquire or retire for value, prior to any scheduled maturity, scheduled repayment, scheduled sinking fund payment or other stated maturity, any Subordinated Indebtedness; (iv) make any Investment (other than any Permitted Investment) in any Person; or (v) declare or pay any dividend or distribution on any Equity Interests of any Restricted Subsidiary to any Person (other than to the Company or any of its Wholly Owned Restricted Subsidiaries) other than pro rata dividends or distributions on a class of Voting Equity Interests of any Restricted Subsidiary, the majority of which is owned by the Company and/or one or more Wholly Owned Restricted Subsidiaries; provided that no Restricted Subsidiary shall declare or pay such pro rata dividends or distributions on its Voting Equity Interests of the Company or any Restricted Subsidiary to any Person 66 (other than the Company or a Wholly Owned Restricted Subsidiary) at a time when it has outstanding Indebtedness owed to the Company or another Restricted Subsidiary; (such payments, Investments or other actions described in clauses (i) through (v) are collectively referred to as "Restricted Payments"), unless ------------------- at the time of, and immediately after giving effect to, the proposed Restricted Payment (the amount of any such Restricted Payment, if other than cash, as determined by the Board of Directors, whose determination shall be conclusive and evidenced by a Board Resolution), (1) no Default or Event of Default shall have occurred and be continuing, (2) the Company could incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 8.04, and (3) the aggregate amount of all Restricted Payments declared or made from and after the Issue Date shall not exceed the sum of, without duplication: (A) 50% of the aggregate Consolidated Adjusted Net Income of the Company accrued on a cumulative basis during the period (treated as one accounting period) beginning on the first day of the first fiscal quarter commencing after the Issue Date and ending on the last day of the Company fiscal quarter immediately preceding the date of the Restricted Payment for which financial statements are available (or, if such aggregate Consolidated Adjusted Net Income shall be a deficit, minus 100% of such deficit); plus (B) the greater of (i) $0 and (ii) the aggregate Net Cash Proceeds received by the Company after the Issue Date as a capital contribution in respect of existing Qualified Equity Interests of the Company or from the issuance or sale of Qualified Equity Interests of the Company (including Equity Interests issued upon the exercise of options, warrants, options or rights to purchase Equity Interest of Qualified Equity Interests of the Company or the conversion or exchange of Indebtedness into Qualified Equity Interests to any person (other than to any Subsidiary of the Company) (except to the extent of any such Net Cash Proceeds applied in the manner provided in clause (b)(ii) or (iii) below) minus $112.0 million; plus (C) in the case of the disposition or repayment of any Investment constituting a Restricted Payment made after the Issue Date, an amount (to the extent not included in the computation of Consolidated Adjusted Net Income) equal to the lesser of (i) the return of capital with respect to such Investment and (ii) the amount of such Investment that was treated as a Restricted Payment; plus (D) so long as the Designation thereof was treated as a Restricted Payment made after the Issue Date, with respect to any Unrestricted Subsidiary that has been redesignated as a Restricted Subsidiary after the Issue Date in accordance with Section 8.17 the proportionate interest of the Company and the Restricted Subsidiaries in the Fair Market Value of any Unrestricted Subsidiary that has been redesignated as a Restricted Subsidiary after the Issue Date in accordance with Section 8.17 not to 67 exceed in any case the Designation Amount with respect to such Restricted Subsidiary upon its Designation; minus (E) the greater of (i) $0 and (ii) the Designation Amount (measured as of the Date of Designation) with respect to any Restricted Subsidiary that has been designated as an Unrestricted Subsidiary after the Issue Date in accordance with Section 8.17. (b) Notwithstanding paragraph (a) above, the Company and any Restricted Subsidiary may take the following actions so long as (with respect to clauses (ii), (iii), (iv), (v), (vi) and (vii) below) no Default or Event of Default shall have occurred and be continuing or occur as a consequence of any such action; (i) the payment of any dividend or distribution within 60 days after the date of declaration or approval thereof, if at such date of declaration or approval such dividend or distribution would have complied with the provisions of paragraph (a) above and such payment will be deemed to have been paid on such date of declaration or approval for purposes of the calculation required by paragraph (a) above; (ii) the purchase, redemption, retirement or other acquisition, of any shares of Equity Interests of the Company, in exchange for, or out of the Net Cash Proceeds of a substantially concurrent capital contribution in respect of, or issuance and sale (other than to a Subsidiary) of, Qualified Equity Interests of the Company; (iii) the purchase, redemption, defeasance or other acquisition or retirement of any Subordinated Indebtedness in exchange for, or out of the Net Cash Proceeds of a substantially concurrent capital contribution in respect of, or issuance and sale (other than to a Subsidiary) of Qualified Equity Interests of the Company; (iv) the purchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Indebtedness in exchange for, or out of the Net Cash Proceeds of a substantially concurrent incurrence (other than to a Subsidiary) of, new Subordinated Indebtedness so long as (A) the principal amount of such new Subordinated Indebtedness does not exceed the principal amount (or, if such Subordinated Indebtedness being refinanced provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination) of the Subordinated Indebtedness being so purchased, redeemed, defeased, acquired or retired, plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of such Subordinated Indebtedness being refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, plus, in either case, the amount of expenses of the Company incurred in connection with such refinancing; (B) such new Subordinated Indebtedness is subordinated to the Notes to the same extent as such Subordinated Indebtedness so purchased, redeemed, defeased, acquired or retired; and (C) such new Subordinated Indebtedness has an Average Life longer than the Average Life of the Notes and a final Stated Maturity of principal later than the final Stated Maturity of principal of the Notes; 68 (v) so long as no Default shall have occurred or be continuing and provided the Company is then a partnership for federal income tax purposes, distributions in respect of, and repurchases of, Equity Interests of the Company owned by the partners of the Company, to the extent necessary to pay current tax liabilities payable in respect of income of the Company in an amount not to exceed in any calendar year the product of (a) the ordinary income from trade or business activities and giving effect to other items of income, loss and deduction reported by the Company for the most recently ended tax year for federal income tax purposes multiplied by (b) a percentage equal to the [highest combined applicable marginal federal and New Jersey income tax rates] for corporations or individuals for such tax year (expressed as a percentage); provided that nothing in this clause (v) shall be deemed to permit any such distribution or repurchase to pay any tax liabilities of the Company's partners resulting from the conversion of the Company from partnership to corporate form; (vi) Investments constituting Restricted Payments not to exceed $5,000,000; (vii) the application of the Net Cash Proceeds from the offering of the Notes and borrowings under the Bank Credit Agreement to pay (x) the Existing Notes Repayment, (y) the Initial NH Redemption Payment and (z) the Preferred Return Payments; and (viii) the Deferred NH Redemption Payment. The actions described in clauses (i), (v) and (vi) of this paragraph (b) shall be Restricted Payments that shall be permitted to be taken in accordance with this paragraph (b) but shall reduce the amount that would otherwise be available for Restricted Payments under clause (3) of paragraph (a), and the actions described in clauses ((ii), (iii), (vii) and (viii) of this paragraph (b) shall be Restricted Payments that shall be permitted to be taken in accordance with this paragraph (b) and shall not reduce the amount that would otherwise be available for Restricted Payments under clause (3) of paragraph (a) above. 8.03. Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries. ------------------------------------------------------------------------- The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Restricted Subsidiary to (a) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Equity Interests or any other interest or participation in, or measured by, its profits owned by the Company or any Restricted Subsidiary, (b) pay any Indebtedness owed to the Company or any other Restricted Subsidiary, (c) make Investments in the Company or any other Restricted Subsidiary, (d) transfer any of its properties or assets to the Company or any other Restricted Subsidiary or (e) guarantee any Indebtedness of the Company or any other Restricted Subsidiary, except for such encumbrances or restrictions existing under or by reason of (i) any agreement in effect on the Issue Date, (ii) applicable law, (iii) customary non-assignment provisions of any lease governing a leasehold interest of the Company or any Restricted Subsidiary, (iv) any agreement or other instrument of a Person acquired by the Company or any Restricted Subsidiary in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any 69 Person, other than the Person, or the property or assets of the Person, so acquired, (v) restrictions contained in any security agreement (including a capital lease obligation) securing Indebtedness of the Company or a Restricted Subsidiary otherwise permitted under this Agreement, (vi) customary nonassignment provisions entered into in the ordinary course of business in leases and other agreements, (vii) restrictions with respect to assets under an agreement pursuant to which the Company or a Restricted Subsidiary has agreed to the sale or disposition of such assets in accordance with Section 8.05, (viii) pursuant to this Agreement and the Notes, (ix) the Bank Credit Agreement as in effect on the date hereof, or (x) any agreement that extends, renews, refinances or replaces the agreements containing the encumbrances and restrictions in the foregoing clause (i) or (iv) so long as such encumbrances or restrictions, taken as a whole, are no less favorable in any material respect to the Company or any Restricted Subsidiary than those contained in the agreement so executed, renewed, refinanced or replaced. 8.04. Incurrence of Indebtedness. (a) The Company will not, and will -------------------------- not permit any Restricted Subsidiary to create, incur, assume, issue, guarantee or in any other manner become, directly or indirectly liable, contingently or otherwise, for or with respect to (in any such case, to "incur") any ----- Indebtedness (including any Acquired Indebtedness) other than Permitted Indebtedness; provided that the Company and Opco may Incur Indebtedness (including any Acquired Indebtedness) if after giving pro forma effect to such incurrence (including the application of net proceeds therefrom), (i) the Consolidated Leverage Ratio for the latest four full fiscal quarters for which financial statements are available immediately preceding the incurrence of such Indebtedness does not exceed 7.5:1.0 and (ii) no Default or Event of Default shall have occurred and be continuing or occur as a consequence of the actions set forth in this covenant. (b) For the purposes of determining compliance with this Section 8.04, in the event that an item of Indebtedness or any portion thereof meets the criteria of more than one of the types of Permitted Indebtedness, the Company will have the right, in its sole discretion, to classify such item of Indebtedness or portion thereof at the time of its incurrence and will only be required to include the amount and type of such Indebtedness or portion thereof under the clause permitting the Indebtedness as so classified, provided that (1) Indebtedness outstanding at the Closing Time (other than under the Bank Credit Agreement or the Notes) will be deemed outstanding under clause (e) of the definition of "Permitted Indebtedness," (2) Indebtedness under the Bank Credit Agreement (including amounts outstanding at the Closing Time) of up to $144,000,000 (as reduced under clause (a) of the definition of "Permitted Indebtedness") will be deemed incurred under clause (a) of the definition of "Permitted Indebtedness" and (3) the Notes will be deemed incurred under clause (b) of the definition of "Permitted Indebtedness". Accrual of interest, accretion of accreted value and the payment of interest through the issuance of securities paid-in-kind shall not be deemed to be an incurrence of Indebtedness for purposes of this Section 8.04. (c) The Company shall not permit any direct or indirect Restricted Subsidiary existing on the Issue Date or thereafter created that is a parent company of Opco to incur, or suffer to exist, any Indebtedness. 8.05. Asset Sales. (a) The Company will not, and will not permit any ----------- Restricted Subsidiary to, directly or indirectly, engage in any Asset Sale unless (i) the 70 consideration received by the Company or such Restricted Subsidiary, as the case may be, for such Asset Sale is not less than the Fair Market Value of the shares or assets sold or otherwise disposed of (as determined by the Board of Directors, whose determination shall be conclusive and evidenced by a Board Resolution) and (ii) the consideration received by the Company or relevant Restricted Subsidiary in respect of such Asset Sale consists of at least 75% (which shall not include like kind exchanges) cash or Cash Equivalents; provided, however, that the amount of any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet) of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes) that are assumed by the transferee of any such assets pursuant to any arrangement releasing the Company or such Restricted Subsidiary from further liability shall be treated as cash or Cash Equivalents. (b) If the Company or any Restricted Subsidiary engages in an Asset Sale, the Company or such Restricted Subsidiary may use the Net Cash Proceeds thereof, within 365 days after such Asset Sale, to (i) permanently repay or prepay any then outstanding senior Indebtedness of the Company or Indebtedness of any Restricted Subsidiary or (ii) invest (or enter into a legally binding agreement to invest) in properties and assets to replace the properties and assets that were the subject of the Asset Sale or in properties and assets that will be used in the businesses of the Company or a Restricted Subsidiary, as the case may be, existing on the Issue Date. If any such legally binding agreement to invest such Net Cash Proceeds is terminated, then the Company, may, within 60 days of such termination or within 270 days of such Asset Sale, whichever is later, apply or invest such Net Cash Proceeds as provided in clause (i) or (ii) (without regard to the parenthetical contained in such clause (ii)) above. The amount of such Net Cash Proceeds not so used as set forth above in this paragraph (b) constitutes "Excess Proceeds," subject to disposition as provided --------------- herein. (c) When the aggregate amount of Excess Proceeds equals or exceeds $2,500,000.00 (or, to the extent not denominated in United States dollars, the United States Dollar Equivalent thereof) the Issuers shall, within 30 business days, make an offer to purchase (an "Excess Proceeds Offer") from all Holders, --------------------- on a pro rata basis, in accordance with the procedures set forth in Section 7.09 above, the maximum aggregate principal amount at Maturity of Notes (expressed as a multiple of $1,000) that may be purchased with the entire amount of such Excess Proceeds. The offer price (the "Excess Proceeds Offer Price") as to each --------------------------- Note shall be equal to (a) 100% of the Accreted Value of the Note, if such purchase date is on or before May 1, 2005, and (b) 100% of the outstanding principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase, if such purchase date is after May 1, 2005 payable in cash. To the extent that the aggregate Excess Proceeds Offer Price that would be payable in respect of Notes tendered pursuant to an Excess Proceeds Offer is less than the Excess Proceeds available for such offer, the Company may use such deficiency for general corporate purposes. If the aggregate Excess Proceeds Offer Price of Notes validly tendered and not withdrawn by Holders thereof exceeds the Excess Proceeds, Notes to be purchased will be selected on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset to zero. (d) Whenever the Excess Proceeds received by the Company exceed $2,500,000, such Excess Proceeds shall be set aside by the Issuers in a separate account pending (i) deposit with a paying agent of the amount required to purchase the Notes tendered in an 71 Excess Proceeds Offer, (ii) delivery by the Issuers of the Exceeds Proceeds Offer Price to the Holders tendered in an Excess Proceeds Offer and (iii) application, as set forth above, of Excess Proceeds for any lawful purposes. Such Excess Proceeds may be invested in Cash Equivalents; provided that the maturity date of any investment shall not be later than the date of the Excess Proceeds Offer. The Issuers shall be entitled to any interest or dividends accrued, earned or paid on such Cash Equivalents. 8.06. Transactions with Affiliates. The Company will not, and will not ---------------------------- permit, cause or suffer any Restricted Subsidiary to conduct any business or enter into or suffer to exist, directly or indirectly, any transaction or series of related transactions (including, without limitation, the sale, purchase, exchange or lease of assets, property or services) with, or for the benefit of, any Affiliate of the Company or any Restricted Subsidiary or any beneficial holder of ten percent (10%) or more of any class of Equity Interests of the Company or any officer or director of the Company or any Restricted Subsidiary (each, an "Affiliate Transaction") unless (i) such transaction or series of --------------------- related transactions are on terms that are no less favorable to the Company or, Restricted Subsidiary, as the case may be, than those that could have been obtained in an arm's length transaction with unrelated third parties who are not Affiliates, (ii) with respect to any transaction or series of related transactions involving aggregate consideration greater than $1,000,000.00 (or, to the extent not denominated in United States dollars, the United States Dollar Equivalent thereof), the Company shall deliver an Officers' Certificate to each Holder certifying that such transaction or series of related transactions has been approved by the Board of Directors of the Company (including a majority of the Disinterested Directors on the Board of Directors,) and such Board of Directors has determined such Affiliate Transaction complies with clause (i) above, (iii) with respect to any transaction or series of related transactions involving aggregate consideration greater than $5,000,000 (or, to the extent not denominated in United States dollars, the United States Dollar Equivalent thereof), the Company shall obtain a written opinion from an Independent Financial Advisor certifying that the terms of such Affiliate Transaction to the Company or the Restricted Subsidiary, as the case may be, are fair from a financial point of view; provided, however, that this provision will not restrict (1) any transaction or series of related transactions among the Company and Wholly Owned Restricted Subsidiaries or among Wholly Owned Restricted Subsidiaries, (2) Investments in Qualified Equity Interests of the Company by any Person, including an Affiliate of the Company, (3) the Company from paying reasonable and customary regular compensation and fees to directors of the Company or any Restricted Subsidiary who are not employees of the Company or any Restricted Subsidiary, (4) the making of any Restricted Payment not prohibited by Section 8.02, (5) the transactions and agreements in existence on the Issue Date and listed in Schedule 8.06 and any amendment thereto that is not ------------- disadvantageous to the Holders in any material respect or (6) any employment agreements entered into by the Company or any of its Restricted Subsidiaries or any stock option agreement entered into by the Company in the ordinary course of business. 8.07. Holding Company Status. The Company shall at all times conduct ---------------------- no business, operations or assets and have no liabilities other than those liabilities (i) permitted under Section 8.04, (ii) incident to acting as a ------------ holding company for, and owning Equity Interests of, Opco, LicensCo and Nassau Finance, (iii) related to the management and administration of the businesses of Opco and its Subsidiaries and (iv) contingent liabilities remaining from the ownership of the assets transferred to, and the liabilities assumed by, Opco in connection with the Recapitalization. 72 8.08. Limitation on Liens. The Company will not, and will not permit -------------------------- any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind securing Pari Passu Indebtedness or Subordinated Indebtedness upon any of its property or assets, now owned or hereafter acquired, unless (i) in the case of any Lien securing Subordinated Indebtedness, the Notes shall be secured by a Lien on such property or assets that is senior in priority to such Lien and (ii) in the case of any other Lien, the Notes shall be directly secured equally and ratably, except for Permitted Liens. 8.09. Limitation on Issuances and Sales of Equity Interests of --------------------------------------------------------------- Restricted Subsidiaries. The Company will not sell, and will not permit any - ----------------------- Restricted Subsidiary, directly or indirectly, to issue or sell, any Equity Interests of a Restricted Subsidiary except (a) to the Company or a Wholly Owned Restricted Subsidiary, (b) if, immediately after giving effect to such issuance or sale, neither the Company nor any of its Subsidiaries owns any Equity Interests of such Restricted Subsidiary or (c) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any remaining Investment in such Person would have been permitted to be made under Section 8.02 herein if made on the date of such issuance or sale. 8.10. Payments for Consents. Neither the Company nor any of its ---------------------------- Subsidiaries shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Noteholder in consideration for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Agreement or the Notes unless such consideration is concurrently offered to be paid or is concurrently paid to all Noteholders that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. 8.11. Merger, Consolidation, Conversion or Sale of Assets. The ---------------------------------------------------------- Company will not, in a single transaction or a series of related transactions, consolidate, amalgamate or combine with or merge with or into, or convert into, any other Person or directly or indirectly, sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets to any other Person or Persons or permit any Restricted Subsidiary to enter into any such transaction or series of related transactions, if such transaction or series of related transactions, in the aggregate, would result in the sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of the properties and assets of the Company and its Restricted Subsidiaries on a consolidated basis to any Person or Persons, unless at the time and immediately after giving effect thereto: (i) either (a) the Company will be the continuing Person or the resulting, surviving or transferee Person or (b) the Person (if other than the Company) formed by such consolidation or into which the Company or such Subsidiary is merged or converted, or the Person which acquires by sale, conveyance, transfer, lease or other disposition, all or substantially all of the properties and assets of the Company and its Subsidiaries on a consolidated basis substantially as an entirety, as the case may be (the "Successor Company"), (1) will be a partnership or corporation organized ----------------- and validly existing under the laws of the United States of America, any state thereof or the District of Columbia and (2) will expressly assume, by a supplement or amendment to this Agreement in form satisfactory to the Required Holders, the Issuer's obligation pursuant 73 to the Notes for the due and punctual payment of the principal (including accretion of original issue discount) of, premium, if any, on and interest on all the Notes and the performance and observance of every covenant of this Agreement on the part of the Issuers to be performed or observed; (ii) immediately before and after giving effect to such transaction or series of transactions on a pro forma basis (and treating any obligation of the Company or any Subsidiary incurred in connection with or as a result of such transaction or series of transactions as having been incurred at the time of such transaction), no Default or Event of Default shall have occurred and be continuing; (iii) immediately after giving effect to such transaction or series of transactions on a pro forma basis (on the assumption that the transaction or series of transactions occurred on the first day of the latest fiscal quarter for which consolidated financial statements of the Company are available immediately prior to the consummation of such transaction or series of transactions with the appropriate adjustments with respect to the transaction or series of transactions being included in such pro forma calculation), the Company (or the Successor Company if the Company is not the continuing obligor under this Agreement) could incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the provisions of Section 8.04; and (iv) if any of the property or assets of the Company or any of its Subsidiaries would thereupon become subject to any Lien, the provisions of Section 8.08 are complied with. Notwithstanding the foregoing, none of the provisions of this Section 8.11 (other than clause (i)) shall apply to the Reorganization. 8.12. Successor Company Substituted. Upon any consolidation, merger ------------------------------------ or conversion, or any sale, assignment, conveyance, transfer, lease or disposition of all or substantially all of the properties and assets of the Company in accordance with Section 8.11 in which the Issuers are not the ------------ continuing obligor under this Agreement, the Successor Company shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Agreement with the same effect as if such successor had been named as the Issuers therein. When a successor assumes all the obligations of its predecessor under this Agreement, the predecessor shall be released from those obligations; provided that in the case of a transfer by lease, the predecessor shall not be released from the payment of principal (including accretion of original issue discount) of, premium, if any, and interest on the Notes. 8.13. Public Disclosures. The Company shall not, and shall not ------------------------- permit any of its Subsidiaries to, disclose the name or identity of any Holder as an investor in the Company in any press release or other public announcement or in any document or material filed with any governmental entity, unless such disclosure is required by applicable law or governmental regulations or by order of a court of competent jurisdiction or in any Shelf Registration Statement, in which case prior to making such disclosure the Company shall give written notice to such Holder describing in reasonable detail the proposed content of such disclosure and shall permit such Holder to review and comment upon the form and substance of such disclosure. 74 8.14. [Reserved] ----------------- 8.15. Conduct of Business. (a) The Company and the Restricted -------------------------- Subsidiaries shall not engage in any businesses which are not the same, similar, related or ancillary to the businesses in which the Company and the Restricted Subsidiaries are engaged in at the Closing Time after giving effect to the Transactions. (b) Nassau Finance will not own any operating assets or other properties or conduct any business other than to serve as an Issuer and obligor on the Notes and other Indebtedness permitted to be incurred by Nassau Finance under this Agreement. 8.16. Limitation on Tax Consolidation. After giving effect to the -------------------------------------- Reorganization the Company shall not and shall not permit any of its Subsidiaries to become a party to a consolidated Federal income tax return (or any combined, unitary or similar state, local or foreign income or franchise tax return) with any Person other than the Company and its Subsidiaries if as a result thereof, as of any date, the aggregate amount of Federal income taxes (or state, local or foreign or franchise taxes) which the Company and its Subsidiaries have then or theretofore paid or become obligated to pay (determined on a cumulative basis, taking into account net benefits received by the Company and its Subsidiaries and also giving effect to amounts payable under any applicable indemnity agreement from any other party to such consolidated returns) exceeds the amount which the Company and its Subsidiaries would have been required to pay pursuant to a consolidated, combined, unitary or similar tax return solely of the Company and its Subsidiaries. 8.17. Limitation on Designations of Unrestricted Subsidiaries. (a) -------------------------------------------------------------- The Company may designate any Subsidiary of the Company as an "Unrestricted Subsidiary" (a "Designation") only if: ----------- (i) no Default shall have occurred and be continuing at the time of or after giving effect to such Designation; and (ii) the Company would be permitted to make an Investment under all applicable provisions of Section 8.02 at the time of Designation in an amount (the "Designation Amount") equal to the Fair Market Value of the ------------------ Investment of the Company and the Restricted Subsidiaries in such Subsidiary on such date. In the event of any such Designation, the Company will be deemed to have made an Investment constituting a Restricted Payment pursuant to Section 8.02 for all purposes of this Agreement in the Designation Amount. The Company shall not and shall not permit any Restricted Subsidiary to, at any time, (i) guarantee any Indebtedness of any Unrestricted Subsidiary or (ii) be directly or indirectly liable for any Indebtedness of any Unrestricted Subsidiary, except in the case of clause (i) or (ii) to the extent permitted under Sections 8.02 and 8.03 herein. (b) The Company may revoke any Designation of a Subsidiary as an Unrestricted Subsidiary (a "Revocation") if: ---------- (i) no Default shall have occurred and be continuing at the time of and after giving effect to such Revocation; and 75 (ii) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately following such Revocation would, if incurred at such time, have been permitted to be incurred for all purposes. All Designations and Revocations must be evidenced by Board Resolutions of the Company delivered to the Holders certifying compliance with the foregoing provisions. 8.18. Limitation on Public Equity Offerings. Prior to the 180th day ------------------------------------------- after the Issue Date, the Company may not effect any Public Equity Offering unless such Public Equity Offering, together with any private placement of Qualified Equity Interests, qualifies as a Qualified Equity Issuance. ARTICLE 9 --------- PROVISIONS RELATING TO RESALES OF SECURITIES -------------------------------------------- 9.01. Private Offerings. The Company and the Purchasers agree that ----------------------- the following provisions will apply to any Private Offerings: (a) Offers and Sales Only to Institutional Accredited Investors or -------------------------------------------------------------------- Qualified Institutional Buyers. Offers and sales of the Securities will be made - ------------------------------ only by the Purchasers or Affiliates thereof qualified to do so in the jurisdictions in which such offers or sales are made. Prior to the effectiveness of a registration statement with respect to the Notes or the Exchange Notes and a registration statement with respect to the Exchange Shares, each such offer or sale shall only be made (i) to persons whom the offeror or seller reasonably believes to be Qualified Institutional Buyers, (ii) to other institutional accredited investors referred to in Rule 501(a)(1), (2), (3) or (7) of Regulation D that the offeror or seller reasonably believes to be and, with respect to sales and deliveries, that are Accredited Investors ("Institutional ------------- Accredited Investors") or (iii) non-U.S. persons that are financial - -------------------- institutions, investment advisors or affiliates of the foregoing or would otherwise be substantially equivalent to an Institutional Accredited Investor outside the United States to whom the offeror or seller reasonably believes offers and sales of the Notes may be made in reliance upon Regulation S under the Securities Act; provided that this will not prohibit offers and sales of Shares pursuant to Rule 144 (or any successor provision) to any Person or of any Securities or Exchange Notes pursuant to a registration statement filed with the Commission under the Securities Act. (b) No General Solicitation. The Securities will be offered by ----------------------------- approaching prospective Subsequent Purchasers on an individual basis. No general solicitation or general advertising (within the meaning of Rule 502(c) under the Securities Act) will be used in the United States and no directed selling efforts (as defined in Regulation S) will be used made outside the United States in connection with the offering of the Securities. (c) Purchases by Non-Bank Fiduciaries. In the case of a non-bank --------------------------------------- Subsequent Purchaser of a Security acting as a fiduciary for one or more third parties, in connection with an offer and sale to such purchaser pursuant to Section 9.01, each third party shall, in the judgment of the applicable Purchaser, be an Institutional Accredited Investor or a Qualified Institutional Buyer or a non-U.S. person outside the United States. 76 (d) Restrictions on Transfer; Legend. Upon original issuance by the ------------------------------------- Company, and until such time as the same is no longer required under the applicable requirements of the Securities Act, the Securities (and all securities issued in exchange therefor or in substitution thereof, other than, in the case of the Notes, the Exchange Notes) shall bear such legend as is required under Section 9.08 of this Agreement. (e) No Future Liability. Following the sale of the Securities by any ------------------------ Purchaser to Subsequent Purchasers in accordance with the terms of this Section 9, such Purchaser shall not be liable or responsible to the Company for any losses, damages or liabilities suffered or incurred by the Company, including any losses, damages or liabilities under the Securities Act, arising from or relating to any resale or transfer of any Security previously sold by such Purchaser in compliance with this Section 9.01. ------------ (f) Securities Act Restrictions. -------------------------------- (i) A Holder selling Securities in a Private Offering to a transferee that is an Accredited Investor or a Qualified Institutional Buyer must satisfy each of the following conditions: (1) such Holder or transferee must represent that the transferee is acquiring the Securities for its own account and that it is not acquiring such Securities with a view to, or for offer or sale in connection with, any distribution thereof (within the meaning of the Securities Act) that would be in violation of the securities laws of the United States or any state thereof, but subject, nevertheless, to the disposition of its property being at all times within its control; and (2) such transferee must agree to be bound by the provisions of this Section 9.01 with respect to any resale of the Securities. (ii) A Holder may sell its Securities to a transferee in accordance with Regulation S under the Securities Act; provided, however, that each of the following conditions is satisfied: (1) the offer of Securities must not be made to a person in the United States; (2) either: (A) at the time the buy order is originated, the transferee is outside the United States or the Holder and any person acting on its behalf reasonably believes that the transferee is outside the United States, or (B) the transaction must be executed in, on or through the facilities of a designated offshore securities market and neither the Holder nor any person acting on its behalf knows that the transaction was pre-arranged with a buyer in the United States; 77 (3) no directed selling efforts may be made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S under the Securities Act, as applicable; and (4) the transaction must not be part of a plan or scheme to evade the registration requirements of the Securities Act. (iii) In the event of a proposed exercise or sale that does not qualify under either subclause (i) or (ii) above, a Holder may sell its Securities only if: (1) such Holder must give written notice to the Company of its intention to exercise or effect such sale, which notice (A) shall describe the manner and circumstances of the proposed transaction in reasonable detail and (B) shall designate the counsel for such Holder, which counsel shall be reasonably satisfactory to the Company; (2) counsel for the Holder must render an opinion, to the effect that such proposed sale may be effected without registration under the Securities Act; and (3) such Holder or transferee must comply with subclause (i)(1) and (2) above. 9.02. Resale Offering Assistance. ---------------------------------- (a) At any time following 24 months after the Closing Time (provided that the Company is not then subject to, and in compliance with, the reporting requirements of Section 13 or 15(d) of the Exchange Act) (the "Assistance Period"), the Company will, if reasonably requested by the Required ----------------- Holders, assist the holders of Notes and Exchange Notes in completing any private or public resale of any portion thereof (including any such resales of the Notes pursuant to any Private Offering and any resales of the Exchange Notes following the completion of the Exchange Offer if the holder thereof was not eligible to participate in the Exchange Offer) in accordance with the holders' intended method of distribution. Such assistance may, in each case, include the following: (i) direct contact between the Company's senior management and advisors and prospective purchasers and hosting of one or more meetings of prospective purchasers; (ii) responding to reasonable inquiries of, and providing answers to, each prospective purchaser who so requests concerning the Company and its Subsidiaries (to the extent such information is available or can be acquired and made available to prospective purchasers without unreasonable effort or expense and to the extent the provision thereof is not prohibited by Applicable Law or applicable confidentiality restrictions) and the terms and conditions of the applicable distribution; (iii) if requested by the Required Holders, making available information and materials to be used in connection with the distribution (including assistance in 78 completion of any sales or placement agent's, if any, or in the case of an underwritten offering, the lead managers' and co-managers' reasonable due diligence review of the Company and its Subsidiaries); and (iv) promptly preparing and providing to the holders of Securities and Exchange Notes (or any sales or placement agent therefor and any underwriter thereof) all information with respect to the Company, including projections (it being recognized that projections as to future events are not to be viewed as fact, and that the actual results may differ from projected results), as such holders (or any sales or placement agent therefor and any underwriter thereof) may reasonably request. Any such projections that will so be made available to such holders (or each placement or sales agent, if any, therefor and each underwriter, if any, thereof) by the Company or any of its representatives will be prepared in good faith based upon reasonable assumptions. (b) During the Assistance Period, the Company will allow the Required Holders (or any sales or placement agent therefor or, in the case of an underwritten offering, the lead manager and co-managers thereof, in each case, as may be selected by the Purchasers and is reasonably acceptable to the Company), in consultation with the Company, to manage all aspects of the distribution, including decisions as to the selection of institutions to be approached and when and how they will be approached. (c) During the Assistance Period, all materials supplied or available under this Section 9.02 or under Section 6 by the Company (including any materials referred to or incorporated by reference therein, "Resale Materials") ---------------- will not, as of its date and as of the closing of such Private Offering, when taken as a whole, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) If, prior to the completion of any sale of the Securities and Exchange Notes, if applicable, by the selling holders (as evidenced by a notice in writing from the holders to the Company), any event shall occur or condition exist as a result of which the Resale Materials would contain a misstatement of a material fact or an omission of a material fact required to make the statements therein, in the light of the circumstances, not misleading, then the Company agrees to promptly prepare and furnish at its own expense to the selling holders, further information so that the statements in the Resale Materials, taken as a whole, will not contain a misstatement of a material fact or an omission of a material fact required to make the statements therein, in the light of the circumstances, not misleading. The Company hereby expressly acknowledges the indemnification and contribution provisions of Sections 13.02 and 13.03 hereof are specifically applicable and relate to Resale Materials. (e) In addition (and not in limitation of the foregoing), for the benefit of holders and beneficial owners from time to time of Securities or Exchange Notes, the Company shall, upon the request of any such holder, furnish, at its expense, to holders and beneficial owners of Securities or Exchange Notes and prospective purchasers thereof information ("Additional Company ------------------ Information") satisfying the requirements of subsection (d)(4) of Rule 144A. - ----------- 79 9.03. Blue Sky Compliance. In connection with any Private Offering -------------------------- of the Notes, the Company shall cooperate with the selling Holders and counsel for the selling Holders to qualify or register the Notes, and the Shares, if applicable, for sale under (or to obtain exemptions from the application of) the Blue Sky or state securities laws of those jurisdictions designated by the selling Holders, shall comply with such laws and shall continue such qualifications, registrations and exemptions in effect so long as required for the distribution of the Notes and the Shares, if applicable. The Company shall not be required to qualify as a foreign corporation or to take any action that would subject it to general service of process in any such jurisdiction where they are not then qualified or to taxation as a foreign corporation. The Company will advise the selling Holders promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Notes or the Shares, if applicable, for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, the Company shall, with the cooperation of the selling Holders, use its best efforts to obtain the withdrawal thereof at the earliest possible moment. 9.04. Ratings of the Notes. In connection with any offering of Notes --------------------------- or Exchange Notes pursuant to the Exchange and Registration Rights Agreement, the Company shall, at its expense, if so requested by the Holders, use its best efforts to enable either Standard & Poor's Ratings Services, Inc. or Moody's Investors Services, Inc. to provide their respective credit ratings of the Notes or the Exchange Notes. 9.05. Exchange and Registration Rights Agreement; Mezzanine ------------------------------------------------------------ Investors Stock Registration Rights Agreement. The Company shall comply with - --------------------------------------------- all provisions and obligations of the Exchange and Registration Rights Agreement and the Mezzanine Investors Stock Registration Rights Agreement and shall comply with all applicable federal and state securities laws in connection therewith. 9.06. No Integration. The Company agrees that it shall not and (to --------------------- the extent within its control) it shall cause its Affiliates not to make any offer or sale of securities of any class of the Company if, as a result of the doctrine of "integration" referred to in Rule 502 under the Securities Act, such offer or sale would render invalid (for the purpose of (a) the sale of the Securities by the Company to the Purchasers, (b) the resale of Securities or Exchange Notes by the Purchasers to Subsequent Purchasers or (c) the resale of Securities or Exchange Notes by such Subsequent Purchasers to others) any applicable exemption from the registration requirements of the Securities Act provided by Section 4(2) thereof or by Rule 144A or Regulation S thereunder or otherwise. 9.07. DTC Agreement. The Company will, to the extent required under -------------------- the Exchange and Registration Rights Agreement, use its best efforts to cause the Exchange Notes to be registered in book-entry form in the name of Cede & Co., as nominee of The Depository Trust Company (the "Depositary"), pursuant to ---------- an agreement among the Company and the Depositary in the form then required by the Depositary. The Company will cooperate with the Holders and use its best efforts to permit the Exchange Notes, when issued, and the Shares, to be eligible for 80 clearance and settlement through the facilities of the Depositary. In connection therewith, the Company shall obtain a CUSIP number for the Exchange Notes. 9.08. Form of Legend for the Securities. Unless otherwise permitted ---------------------------------------- by Section 9.01(f), every Unit and Note issued and delivered hereunder shall bear a legend in substantially the following form: THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR -------------- QUALIFIED UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT IS IN EFFECT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY IS SUBJECT TO THE TERMS OF THE PURCHASE AGREEMENT, DATED AS OF MAY 4, 2000 (AS AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME, THE "PURCHASE AGREEMENT"), ------------------ AMONG NASSAU BROADCASTING PARTNERS, L.P., NASSAU FINANCE CORP. AND THE PURCHASERS NAMED THEREIN, [THE EXCHANGE AND NOTES REGISTRATION RIGHTS AGREEMENT, DATED AS OF MAY 4, 2000, AMONG THE COMPANY AND THE PURCHASERS NAMED THEREIN], /1/ [THE FOURTH RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF THE COMPANY, DATED AS OF MAY 4, 2000, AMONG THE PARTNERS NAMED THEREIN, THE SECOND AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT, DATED AS OF MAY 4, 2000, AMONG THE COMPANY, THE PURCHASERS AND THE OTHER PARTIES NAMED THEREIN, AND THE COMMON STOCK REGISTRATION RIGHTS AGREEMENT, DATED AS OF MAY 4, 2000, AMONG THE COMPANY AND THE PURCHASERS NAMED THEREIN], COPIES OF SUCH AGREEMENTS ARE AVAILABLE AT THE OFFICES OF NASSAU BROADCASTING PARTNERS, L.P. Unless otherwise permitted by Section 9.01(f), each LP Unit issued and delivered hereunder shall bear a legend in substantially the following form: THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR -------------- QUALIFIED UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT IS IN EFFECT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY IS SUBJECT TO THE TERMS OF THE PURCHASE AGREEMENT, DATED AS OF MAY 4, 2000, AMONG NASSAU BROADCASTING PARTNERS, L.P., NASSAU FINANCE CORP. AND THE OTHER PURCHASERS __________________ /1/ To be included only on the certificates evidencing the Units and the Notes 81 NAMED THEREIN THE FOURTH RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF THE COMPANY, DATED AS OF MAY 4, 2000, AMONG THE PARTNERS NAMED THEREIN, THE SECOND AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT, DATED AS OF MAY 4, 2000, AMONG THE COMPANY, THE PURCHASERS AND THE OTHER PARTIES NAMED THEREIN, AND THE COMMON STOCK REGISTRATION RIGHTS AGREEMENT, DATED AS OF MAY 4, 2000, AMONG THE COMPANY AND THE OTHER PURCHASERS NAMED THEREIN. COPIES OF SUCH AGREEMENTS ARE AVAILABLE AT THE OFFICES OF NASSAU BROADCASTING PARTNERS, L.P. ARTICLE 10 ---------- THE NOTES --------- 10.01. Form and Execution. The Notes shall be in the form of Exhibit ------------------------- ------- A hereto. The Notes shall be executed on behalf of (x) the Company by the - - President or any of the Vice Presidents of the General Partner (so long as the Company is a partnership) and of the Company (following the Reorganization) attested by the Secretary or one of the Assistant Secretaries of the General Partner (so long as the Company is a partnership) and the Company (following the Reorganization) (y) Nassau Finance Corp. by its President or any of its Vice Presidents under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Notes may be manual or facsimile. Notes bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the General Partner (prior to the Reorganization) or Company (after the Reorganization) shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes. 10.02. Terms of the Notes. The terms of the Notes shall be as set ------------------------- forth in Exhibit A. Without limiting the foregoing: (a) Stated Maturity. The Stated Maturity of the principal of Notes ---------------------- shall be as provided in Exhibit A. --------- (b) Interest. The Notes will accrete original issue discount at --------------- the rate of 13% per annum (increasing to 14% per annum as and from November 1, 2000), compounded semiannually, to an aggregate principal amount of $1,000 by May 1, 2005, and shall bear cash interest at the rate of 14% per annum accruing from May 1, 2005, or from the most recent Interest Payment Date to which cash interest has been duly paid or provided for, payable on November 1, 2005 and, semiannually thereafter on May 1 and November 1 of each year and Special Interest, if any, on their principal amount and overdue interest and Special Interest as provided in Exhibit A. --------- 10.03. Denominations. The Notes shall be issuable only in registered --------------------- form without coupons and only in denominations of U.S. $1,000 and any integral multiple thereof. 82 10.04. Payments and Computations. All payments of interest on the --------------------------------- Notes shall be paid to the Persons in whose names such Notes are registered on the Security Register at the close of business on the date fifteen days prior to the related Interest Payment Date (the "Regular Record Date") and all payments ------------------- of principal on the Notes shall be paid to the persons in whose names such Notes are registered on the applicable Redemption Date or at Maturity, as applicable. Principal on any Note shall be payable only against surrender therefor, while payments of interest on Notes shall be made, in accordance with this Agreement and subject to applicable laws and regulations, by check mailed on or before the due date for such payment to the Person entitled thereto at such Person's address appearing on the Security Register or, by wire transfer to such account as any Noteholder shall designate by written instructions received by the Issuers no less than 15 days prior to any applicable Interest Payment Date, which wire instruction shall continue in effect until such time as the Noteholder otherwise notifies the Company or such Holder no longer is the registered owner of such Note or Notes. Interest will be computed on the basis of a 360-day year of twelve 30- day months. 10.05. Registration; Registration of Transfer and Exchange. Security --------------------------------------------------------------------- Register. The Issuers shall maintain a register (the "Security Register") for - -------- ----------------- the registration or transfer of the Notes. The name and address of the Holder of each Note, records of any transfers of the Notes and the name and address of any transferee of a Note shall be entered in the Security Register and the Issuers shall, promptly upon receipt thereof, update the Security Register to reflect all information received from a Noteholder. There shall be no more than one Holder for each Note, including all beneficial interests therein. (b) Registration of Transfer. Upon surrender for registration of ----------------------------- transfer of any Note at the office or agency of the Issuers, the Issuers shall execute and deliver, in the name of the designated transferee or transferees, one or more new Notes, of any authorized denominations and like aggregate principal amount. (c) Exchange. At the option of the Noteholder, Notes may be ------------- exchanged for other Notes, of any authorized denominations and of like aggregate principal amount, upon surrender of the Notes to be exchanged at such office or agency. Whenever any Notes are so surrendered for exchange, the Issuers shall execute and deliver the Notes which the Holder making the exchange is entitled to receive. (d) Effect of Registration of Transfer or Exchange. All Notes issued --------------------------------------------------- upon any registration of transfer of exchange of Notes shall be the valid obligations of the Issuers, evidencing the same debt, and entitled to the same benefits under this Agreement, as the Notes surrendered upon such registration of transfer or exchange. (e) Requirements; Charges. Every Note presented or surrendered for -------------------------- registration of transfer or for exchange shall (if so required by the Issuers) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Issuers duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Notes, but the Issuers may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed 83 in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Section 8.11 not involving any transfer. (f) Certain Limitations. If the Notes are to be redeemed in part, -------------------------- the Issuers shall not be required (i) to issue, register the transfer of or exchange any Note during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of any such Notes selected for redemption under Section 12.02 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. 10.06. Mutilated, Destroyed, Lost and Stolen Notes. If any mutilated --------------------------------------------------- Note is surrendered to the Issuers, the Issuers shall execute and deliver in exchange therefor a new Note of the same principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Issuers (a) evidence to their satisfaction of the destruction, loss or theft of any Note and (b) such security or indemnity as may be required by then to save each of it and any agent harmless, then, in the absence of notice that such Note has been acquired by a bona fide purchaser, the Issuers shall execute and deliver, in lieu of any such destroyed, lost or stolen Note, a new Note of a like principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Issuers in their discretion may, instead of issuing a new Note, pay such Note. Upon the issuance of any new Note pursuant to this Section, the Issuers may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. Every new Note issued pursuant to this Section in lieu of any destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Issuers, whether or not the destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Agreement equally and proportionately with any and all other Notes duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. 10.07. Persons Deemed Owners. Prior to due presentment of a Note ---------------------------- for registration of transfer, the Issuers and any agent of the Issuers may treat the Person in whose name such Note is registered as the owner of such Note for the purpose of receiving payment of principal of and interest on such Note and for all other purposes whatsoever, whether or not such Note be overdue and neither the Issuers nor any agent of the Issuers shall be affected by notice to the contrary. 84 10.08. Cancellation. All Notes surrendered for payment, redemption, -------------------- registration of transfer or exchange shall, if surrendered to any Person other than the Issuers, be delivered to the Issuers and shall be promptly canceled by it. The Issuers shall cancel any Notes previously issued and delivered hereunder which the Issuers may have reacquired. 10.09. Home Office Payment. So long as any Purchaser or its nominee --------------------------- shall be the holder of any Note, and notwithstanding anything contained in this Agreement or such Note to the contrary, the Issuers will pay all sums becoming due on such Note for principal, premium, if any, and interest by such method and at such address as such Purchaser shall have from time to time specified to the Issuers in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Issuers made concurrently with or reasonably promptly after payment or prepayment in full of any Note, such Purchaser shall surrender such Note for cancellation reasonably promptly after any such request, to the Issuers at their principal executive offices. Prior to any sale or other disposition of any Note held by such Purchaser or its nominee such Purchaser will, at its election, either endorse thereon the amount of principal paid thereon and the last date to which original issue discount has accreted or interest has been paid thereon or surrender such Note to the Issuers in exchange for a new Note or Notes pursuant to Section 10.05. The Issuers will afford the benefits of this Section 10.09 to any direct or indirect transferee of any Note purchased by such Purchaser under this Agreement and that has made the same agreement relating to such Note as such Purchaser made in this Section 10.09. ARTICLE 11 ---------- EVENTS OF DEFAULT ----------------- 11.01. Events of Default. An Event of Default shall exist upon the ------------------------- occurrence of any of the following specified events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) (each, an "Event of Default"): ---------------- (1) default in the payment of any interest on any Note when it becomes due and payable and continuance of such default for a period of 30 days; or (2) default in the payment of the principal of (or premium, if any, on) any Note at its Maturity (upon acceleration, required purchase or otherwise); or (3) (A) default in the performance, or breach, of any covenant or agreement of the Issuers contained in this Agreement (other than a default in the performance, or breach, of a covenant or agreement which is specifically dealt with in the immediately preceding clauses (1) and (2) or in clauses (B), (C) or (D) of this clause (3) of this Section 11.01), and continuance of such default or breach for a period of 45 days after there has been given, by registered or certified mail, to the Issuers by holders of at least 25% aggregate principal amount at Maturity of the Notes then Outstanding a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of --------- Default" hereunder; (B) default in the performance or breach of the ------- 85 provisions of Sections 7.09 and 8.05; (C) default in the performance or breach of Section 8.11; or (D) the failure to make or consummate a Change of Control Offer in accordance with the provisions of Section 7.08; or (4) (A) one or more defaults in the payment of principal of (or premium, if any, or interest on) Indebtedness of the Issuers or any Restricted Subsidiary aggregating $2,500,000.00 or more (or, to the extent not denominated in United States dollars, the United States Dollar Equivalent thereof), when the same becomes due and payable at the Stated Maturity thereof, and such default or defaults shall have continued after any applicable grace period and shall not have been cured or waived or (B) Indebtedness of the Company or any Significant Subsidiary aggregating $2,500,000.00 or more (or, to the extent not denominated in United States dollars, the United States Dollar Equivalent thereof) shall have been accelerated or otherwise declared due and payable, or required to be prepaid or repurchased (other than by regularly scheduled required prepayment) prior to the Stated Maturity thereof; or (5) one or more final judgments, orders or decrees of any court or regulatory agency shall be rendered against either Issuer or any Restricted Subsidiary or their respective properties for the payment in money, either individually or in an aggregate amount, in excess of $2,500,000.00 (or, to the extent not denominated in United States dollars, the United States Equivalent thereof) and either (A) an enforcement proceeding shall have been commenced by any creditor upon such judgment or order or (B) there shall have been a period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, was not in effect; or (6) the entry of a decree or order by a court having jurisdiction in the premises adjudging either Issuer or any Significant Subsidiary a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Issuers or any Significant Subsidiary under a Bankruptcy Law or any other applicable federal or state law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Issuers or any Significant Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (7) the institution by either Issuer or any Significant Subsidiary of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under a Bankruptcy Law or any other applicable federal or state law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of either Issuer or any Significant Subsidiary or of any substantial part of its property, or the making by it of a general assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due; or 86 (8) any representation, warranty, certification or statement made or deemed to have been made by or on behalf of the Company or by any officer of the Company in respect of any Transaction Document or in any statement or certificate at any time given by or on behalf of the Company or by any officer of the Company in writing pursuant hereto or in connection herewith or therewith shall be false in any material respect on the date as of which made; or (9) an ERISA Event shall have occurred that, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; or (10) one or more FCC Authorizations shall be terminated or revoked such that Opco is no longer able to operate the related Radio Station and retain the revenue received therefrom or one or more FCC Authorizations shall fail to be renewed at the stated expiration thereof such that Opco is no longer able to operate the related Radio Station and retain the revenue received therefrom, except with respect to any of the foregoing in the event that the termination, revocation or failure to renew would result in the loss of less than 5% of Opco's consolidated gross revenue; and such termination, revocation or failure to renew is not cured within the applicable cure period under the Bank Credit Agreement plus 15 days after the receipt of notice by Opco of such termination, revocation or failure to renew. 11.02. Remedies. If an Event of Default (other than an Event of ----------------- Default specified in Section 11.01(6) and (7) occurs and is continuing, then and in every such case the Noteholders of not less than 25% or more in principal amount at Maturity of the then outstanding Notes may declare the Accreted Value (and the then applicable premium, if any) and any accrued interest and Special Interest (collectively, the "Default Amount") of all the Notes to be due and -------------- payable immediately, by a notice in writing to the Company, and upon any such declaration such Default Amount shall become immediately due and payable. If an Event of Default specified in Section 11.01(6) and (7) occurs and is continuing, the Default Amount on the outstanding Notes shall automatically, and without any declaration or other action on the part of any Noteholder, become immediately due and payable. At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained, the Noteholders of a majority in principal amount at Maturity of the outstanding Notes, by written notice to the Company, may rescind and annul such declaration and its consequences if: (a) the Company has paid a sum sufficient to pay: (i) all overdue interest and Special Interest on all Notes; (ii) the Accreted Value of (and premium, if any, on) any Notes which have become due otherwise than by such declaration of acceleration (including any Notes required to have been purchased pursuant to an offer to purchase that the Company is required to make hereunder) and any interest and Special Interest thereon at the rate borne by the Notes; and 87 (iii) to the extent that payment of such interest is lawful, interest upon overdue interest and overdue Special Interest at the rate provided therefor in the Notes; and (b) all Events of Default, other than the nonpayment of the principal amount of (and premium, if any, on) Notes at the Maturity thereof and interest and Special Interest thereon which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 11.03. 11.03. Waiver of Past Defaults. The Required Holders may on behalf of -------------------------------- the Noteholders of all the Notes waive any past default hereunder and its consequences, except a default: (a) in the payment of the principal (or premium, if any) or interest or Special Interest on any Note (including any Note which is required to have been purchased pursuant to an offer to purchase that the Company is required to make hereunder), or (b) in respect of a covenant or provision hereof which under Section 16.04 cannot be modified or amended without the consent of the Holder of each outstanding Note affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Agreement; provided, however, no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. ARTICLE 12 ---------- REDEMPTION ---------- 12.01. Right of Redemption. The Notes may be redeemed at the election ---------------------------- of the Issuers upon such conditions, at such times, in such amounts and at the Redemption Prices (together with any applicable accrued interest and any Special Interest to the Redemption Date) as specified in this Section 12 and in the form of Note attached as Exhibit A hereto. --------- 12.02. Partial Redemptions. In case the Issuers are entitled to, and ---------------------------- elect to, redeem less than all of the Notes, the Issuers shall redeem the Notes pro rata from each Noteholder (or as nearly pro rata as practicable). For all purposes of this Agreement, unless the context otherwise requires, all provisions relating to the redemption of Notes shall relate, in the case of any Notes redeemed or to be redeemed only in part, to the portion of the principal amount of such Notes which has been or is to be redeemed. 12.03. Mandatory Redemption. (a) If the Company consummates a ----------------------------- Qualified Equity Issuance on or before the 180th day after the Issue Date, the Issuers shall be required to redeem all of the Notes originally issued at a Redemption Price of 101% of the Accreted Value thereof, together with accrued and unpaid interest, if any, with the Net Cash Proceeds of such Qualified Equity Issuance. 88 (b) In the event that the Issuers have not redeemed all of the Notes in accordance with Section 12.03(a) by the 180/th/ day after the Issue Date, the Issuers shall be required to redeem with the Net Cash Proceeds of any Public Equity Offering(s) all of the Notes not yet redeemed at the relevant Redemption Price set forth under Section 12.04 below, together with accrued and unpaid interest, if any, provided that the Company shall not be required to redeem any Notes pursuant to this Section 12.03 (b) at (x) any time after March 31, 2001 or (y) such time as the Consolidated Leverage Ratio is 7.5 to 1 or lower and no Default or Event of Default shall have occurred and be continuing. If the aggregate Redemption Price of the Notes exceeds the Net Cash Proceeds of any Public Equity Offering, Notes to be redeemed from such Net Cash Proceeds will be selected on a pro rata basis. 12.04. Optional Redemption. The Notes will be redeemable, at the ---------------------------- option of the Issuers, as a whole or from time to time in part, on not less than 30 or more than 60 days' prior notice at the following Redemption Prices (expressed as percentages of Accreted Value (on or before May 1, 2005) or principal amount at Maturity (after May 1, 2005), as applicable) together with accrued and unpaid interest, if any, to the Redemption Date (subject to the right of Holders of record on the relevant Regular Record Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date), if redeemed during the periods indicated below: Issue date to 180/th/ day after Issue Date 101.00% 181/st/ day after Issue Date to April 30, 2002 111.00 May 1, 2002 to April 30, 2003 110.00 May 1, 2003 to April 30, 2004 109.00 May 1, 2004 to April 30, 2005 108.00 May 1, 2005 to April 30, 2006 107.00 May 1, 2006 to April 30, 2007 105.25 May 1, 2007 to April 30, 2008 103.50 May 1, 2008 to April 30, 2009 101.75 May 1, 2009 until Maturity 100.00 Notwithstanding the foregoing, the Notes shall not be redeemable during the period commencing on the Issue Date and ending on the 180/th/ day after the Issue Date unless all of the Notes are redeemed out of the Net Cash Proceeds of a Qualified Equity Issuance. 12.05. [Reserved]. ------------------- 12.06. Notice of Redemption. Notice of redemption shall be given by ----------------------------- first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Noteholder to be redeemed, at his address appearing in the Security Register. All notices of redemption shall state: (a) the Redemption Date, (b) the Redemption Price and the amount of accrued interest to the Redemption Date, if any, 89 (c) if less than all the outstanding Notes are to be redeemed, the portion of each Note to be redeemed, (d) that on the Redemption Date the Redemption Price will become due and payable upon each such Note to be redeemed and that interest and any Special Interest thereon will cease to accrue on and after said date, and (e) the place or places where such Notes are to be surrendered for payment of the Redemption Price. Notice of redemption of Notes to be redeemed at the election of the Issuers shall be given by the Issuers and at the expense of the Issuers. 12.07. Deposit of Redemption Price. Prior to any Redemption Date, the ------------------------------------ Issuers shall segregate and hold in trust an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) any applicable accrued interest and Special Interest on, all the Notes which are to be redeemed on that date. 12.08. Notes Payable on Redemption Date. If notice of redemption ----------------------------------------- shall have been given as provided above, the Notes so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Issuers shall default in the payment of the Redemption Price and any applicable accrued interest and Special Interest) such Notes shall not bear interest. Upon surrender of any such Note for redemption in accordance with said notice, such Note shall be paid by the Company at the Redemption Price, together with any applicable accrued interest and Special Interest to the Redemption Date; provided, however, that accretion of original issue discount or installments of interest or Special Interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Noteholders of such Notes, or one or more Predecessor Notes, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of this Agreement. If any Note called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate provided by the Note. 12.09. Notes Redeemed in Part. Any Note which is to be redeemed only ------------------------------- in part shall be surrendered at the principal offices of the Company (with, if the Company so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company duly executed by, the Noteholder thereof or his attorney duly authorized in writing), and the Company shall execute and deliver to the Noteholder of such Note without service charge, a new Note or Notes, of any authorized denomination as requested by such Noteholder, in aggregate principal amount at Maturity equal to and in exchange for the unredeemed portion of the principal of the Note so surrendered. 90 ARTICLE 13 ---------- EXPENSES, INDEMNIFICATION AND CONTRIBUTION AND TERMINATION ---------------------------- 13.01. Expenses. Whether or not the transactions contemplated hereby ---------------- are consummated, the Company will pay all costs and expenses (including reasonable and documented attorneys' and accountants' fees and disbursements) incurred by the Purchasers or any holder of a Security in connection with the Transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement, the other Transaction Documents or the Securities (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (a) the Purchasers' reasonable and documented out-of-pocket expenses in connection with the Purchasers' examinations and appraisals of the properties, books and records of the Company and its Subsidiaries, (b) the reasonable costs and expenses incurred in enforcing, defending or declaring (or determining whether or how to enforce, defend or declare) any rights or remedies under this Agreement, the Transaction Documents or the Securities or Exchange Notes or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement, the other Transaction Documents or the Securities, or by reason of being a holder of any Securities, (c) the costs and expenses, including reasonable and documented consultants' and advisors' fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary of the Company or in connection with any work-out or restructuring of the transactions contemplated hereby, by the other Transaction Documents or by the Securities. The Company will pay, and will save the Purchasers and each other holder of a Security harmless from, all claims in respect of any fees, costs or expenses if any, of brokers and finders in relation to the Transactions. It is recognized that the Company will not be liable for any costs and expenses that arise out of the gross negligence or willful misconduct of any Purchaser or Holder. 13.02. Indemnification. Indemnification by the Company. The Company ------------------------------------------------------- agrees to indemnify and hold harmless (i) each Purchaser and each Person who participates as a placement or sales agent or as an underwriter in any Private Offering, (ii) each Person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) any such Person referred to in clause (i) (any of the Persons referred to in this clause (ii) being referred to herein as a "Controlling Person") and (iii) the respective ------------------ officers, directors, managing directors, stockholders, partners, employees, representatives, trustees, fiduciaries, and agents of any Person referred to in clause (i) or any such Controlling Person (any such Person referred to in clause (i), (ii) or (iii), a "Purchaser Indemnified Person") against any losses, ---------------------------- claims, damages or liabilities, joint or several, to which such Purchaser Indemnified Person may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) in whole or in part any inaccuracy in any of the representations and warranties of the Company contained herein, (ii) in whole or in part upon the failure of the Company to perform its obligations hereunder or under Applicable Law, (iii) in whole or in part any untrue statement or alleged untrue statement of a material fact contained in any Resale Materials, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein, not misleading, (iv) the failure of any of the consolidated balance sheets included in the Company Financial Statements (including the related notes and schedules) to 91 fairly represent the consolidated financial position of the Company and its Subsidiaries as of its date, or failure of any of the consolidated statements of income, and cash flows of the Company and its Subsidiaries included in the Company Financial Statements (including any related notes and schedules) to fairly represent the results of operations and income, or cash flows, as the case may be, of the Company and its Subsidiaries for the periods set forth therein, in each case in accordance with GAAP, except as may be noted therein and subject in the case of any interim financial statements, to normal year-end adjustments that are not material in amount or effect, (v) any change in the financial condition, operations, business, properties or prospects of the Company and its Subsidiaries during the period from the Audit Date to the Closing Time, inclusive, that, individually or in the aggregate, has had or would have a Material Adverse Effect that has not been disclosed in writing to the Purchasers (provided, that payment in full of the Notes held by a Purchaser and all interest and premium thereon shall extinguish all claims by such Purchaser and any Person claiming through such Purchaser under this clause (v)), or (vi) the Transactions; and will reimburse each such Purchaser Indemnified Person for any legal and other expenses incurred by such Purchaser Indemnified Person in connection with investigating or defending any such action or claims as such expenses are incurred. The indemnity agreement set forth in this Section 13.02(a) shall be in addition to any liabilities that the Company may otherwise have; provided, however, that the Company will not be liable for any claims for indemnification that arise out of the gross negligence or willful misconduct of any Purchaser or Holder. (b) Indemnification by the Purchasers. Each Purchaser agrees, ----------------------------------------- severally and not jointly, to indemnify and hold harmless (i) the Company and (ii) each Controlling Person of the Company and (iii) the respective officers, directors, employees, representatives and agents of each Company or any such Controlling Person (any such Person referred to in clause (i), (ii) or (iii), a "Company Indemnified Person") against any losses, claims, damages or -------------------------- liabilities, joint or several, to which such Company Indemnified Person may become subject, under the Securities Act or otherwise insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) in whole or in part any inaccuracy of any of such Purchaser's representations and warranties in Section 5 or (ii) in whole or in part the failure of such Purchaser to perform its obligations in Section 9.01; and will reimburse the Company Indemnified Persons for any legal and other expenses reasonably incurred by the Company Indemnified Persons in connection with investigating or defending any such actions or claims as such expenses are incurred. The indemnity agreement set forth in this Section 13.02(b) shall be in addition to any liabilities that each Purchaser may otherwise have; provided, however, that the Company will not be liable for any claims for indemnification that arise out of the gross negligence or willful misconduct of any Purchaser or Holder. (c) Notifications and Other Indemnification Procedures. Promptly ---------------------------------------------------------- after receipt by a Purchaser Indemnified Person or a Company Indemnified Person (each, an "Indemnified Person") of notice of the commencement of any action, such Indemnified Person shall, if a claim in respect thereof is to be made against an indemnifying party under Section 13.02(a) or 13.02(b), as applicable, notify such indemnifying party in writing of the commencement thereof, but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any Indemnified Person otherwise than under Section 13.02(a) or 13.02(b), as applicable, or to the extent it is not materially prejudiced as a proximate result of such failure. In case any such action is brought against any Indemnified 92 Person and it shall notify an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it shall elect within 30 days after receiving any such notification, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such Indemnified Person (who shall not, except with the consent of the Indemnified Person, which consent shall not be unreasonably withheld, be counsel to the indemnifying party), and, after notice from the indemnifying party to such Indemnified Person of its election so to assume the defense thereof, the indemnifying party shall not be liable to such Indemnified Person under such paragraph for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such Indemnified Person, in connection with the defense thereof other than reasonable costs of investigation. Notwithstanding the foregoing, any Indemnified Person shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Indemnified Person unless (i) the Indemnified Person shall have been advised by counsel that representation of the Indemnified Person by counsel provided by the indemnifying party would be inappropriate due to actual or potential conflicting interests between the indemnifying party and the Indemnified Person, including situations in which there are one or more legal defenses available to the Indemnified Person that are different from or additional to those available to the indemnifying party, (ii) the indemnifying party shall have authorized in writing the employment of counsel for the Indemnified Person at the expense of the indemnifying party or (iii) the indemnifying party shall have failed to assume the defense or retain counsel reasonably satisfactory to the Indemnified Person; provided, however, that the indemnifying party shall not, in connection with any one such action or proceeding or separate but substantially similar actions or proceedings arising out of the same general allegations, be liable for the fees and expenses of more than one separate firm of attorneys at any time for all Indemnified Persons, except to the extent that local counsel, in addition to their regular counsel, is required in order to effectively defend against such action or proceeding. No indemnifying party shall, without the written consent of the Indemnified Person, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the Indemnified Person is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the Indemnified Person from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any Indemnified Person. 13.03. Contribution. If the indemnification provided for in Section -------------------- 13.02 is unavailable to or insufficient to hold harmless an Indemnified Person under paragraph (a), (b) or (c) of Section 13.02 in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the (i) relative benefits received by the Company on the one hand and the Purchasers on the other hand from the issuance and sale of the Securities; or (ii) if the allocation provided in clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the related benefits referred to in clause (i) above but also the relative fault of the indemnifying party on the one hand and the Indemnified Person on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as 93 well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Purchasers on the other hand in connection with the sale of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company and the commitment fee payable to the Purchasers at the Closing Time. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party on the one hand or the Indemnified Person on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties agree that it would not be just and equitable if contributions pursuant to this Section 13.03 were determined by pro rata allocation (even if the Indemnified Persons were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 13.03. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this Section 13.03 shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 13.03, no Purchaser shall be required to contribute any amount which, when taken together with any amounts paid by such Purchaser under Section 13.02(b) exceeds such Purchaser's pro rata share of the commitment fee payable to the Purchasers at the Closing Time. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The obligations of the Company and the Purchasers under this Section 13.03 shall be in addition to any liability which the Company and the respective Purchasers may otherwise have. 13.04. Survival. The obligations of the Company under this Section 13 ----------------- will survive the payment or transfer of any Security or Exchange Note, the enforcement, amendment or waiver of any provision of this Agreement and the termination of this Agreement. 13.05. Termination. -------------------- (a) The Purchasers may terminate this Agreement, by notice to the Company, at any time at or prior to the Closing Time if (1) if any of the conditions in Section 3 are not satisfied or waived in writing by the Purchasers or are not capable of being so satisfied or waived at or prior to such date or (2) if there has been, since the time of execution of this Agreement or since the Audit Date, any material adverse change in the business, management, operations, affairs, condition (financial or otherwise) assets or prospects of the Company and its Subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business. (b) Liabilities. If this Agreement is terminated pursuant to this ----------- Section 13.05, such termination shall be without liability of any party to any other party except as provided in Section 13.01 hereof, and provided further that Sections 1.01, 1.02, 13.02, 13.03, 13.04, 14.08 and 14.12 shall survive such termination and remain in full force and effect. 94 ARTICLE 14 ---------- MISCELLANEOUS ------------- 14.01. Notices. Except as otherwise expressly provided herein, all ---------------- notices and other communications shall have been duly given and shall be effective (a) when delivered, (b) when transmitted via telecopy (or other facsimile device) to the number set out below if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), (c) the day following the day on which the same has been delivered prepaid to a reputable national overnight air courier service or (d) the third Business Day following the day on which the same is sent by certified or registered mail, postage prepaid, in each case to the respective parties at the address set forth below, or at such other address as such party may specify by written notice to the other party hereto: (i) to a Purchaser or its nominee, to the Purchaser or its nominee at the address specified for such communications in Schedule A, with a copy to ---------- Shearman & Sterling, 599 Lexington Avenue, New York, NY 10022, attention: Christopher C. Paci, Esq., or at such other address as the Purchaser or its nominee shall have specified to the Company in writing; (ii) if to any other Holder to such Holder at the address of such Holder appearing in the Security Register or such other address as such other holder shall have specified to the Company in writing; or (iii) if to the Company at Nassau Broadcasting Partners, L.P. 619 Alexander Road 3rd Floor Princeton, N.J. 08540 Attention: Michael S. Libretti with a copy to Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, NY 10036-6522, Attention: Phyllis G. Korff, Esq. or at such other address as the Company shall have specified to the holder of each Note in writing. 14.02. Benefit of Agreement; Assignments and Participations. Except ------------------------------------------------------------ as otherwise expressly provided herein, all covenants, agreements and other provisions contained in this Agreement by or on behalf of any of the parties hereto shall bind, inure to the benefit of and be enforceable by their respective successors and assigns (including, without limitation, any subsequent holder of a Security or Exchange Note) whether so expressed or not; provided, however, that the Company may not assign and transfer any of its rights or obligations without the prior written consent of the other parties hereto and each such holder. 95 Nothing in this Agreement or in the Securities or Exchange Notes, express or implied, shall give to any Person other than the parties hereto, their successors and assigns and the holders from time to time of the Securities or Exchange Notes any benefit or any legal or equitable right, remedy or claim under this Agreement. 14.03. No Waiver; Remedies Cumulative. No failure or delay on the --------------------------------------- part of any party hereto or any Holder in exercising any right, power or privilege hereunder or under the Securities or Exchange Notes and no course of dealing between any Company and any other party or Holder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under the Securities or Exchange Notes preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies provided herein and in the Securities and Exchange Notes are cumulative and not exclusive of any rights or remedies which the parties or Holders would otherwise have. No notice to or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the other parties hereto or the Holders to any other or further action in any circumstances without notice or demand. 14.04. Amendments, Waivers and Consents. This Agreement may be ----------------------------------------- amended, and the observance of any term hereof may be waived (either retroactively or prospectively) with (and only with) the written consent of the Company and the Required Holders (or, if prior to the Closing Time, Purchasers who have agreed to purchase a majority in aggregate principal amount at Maturity of the Notes); provided, however, that no such amendment or waiver may, without the prior written consent of the Holder of each Note and Exchange Note then outstanding and affected thereby (or each Purchaser if prior to the Closing Time): (1) change the Stated Maturity of the principal of, or any installment of interest on, any Note, or reduce the Accreted Value thereof or premium, if any, or the rate of interest thereon, or alter any redemption provision with respect to the timing or amount of payment thereof, or change the coin or currency in which the Accreted Value of any Note or any premium, if any, or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment after the Stated Maturity thereof (or, in the case of redemption, on or after the redemption date), or (2) amend, change or modify any of the provisions of Section 7.08, 7.09 or 8.05 including, in each case, amending, changing or modifying any definitions relating thereto, or (3) reduce the percentage in principal amount at Maturity of the outstanding Notes, the consent of whose Holders is required for any such amendment or supplement, or the consent of whose Holders is required for any waiver of compliance with certain provisions of this Agreement or certain defaults hereunder and their consequences provided for in this Agreement, or (4) modify any provisions of this Section or Section 11.03, except to increase the percentage in principal amount at Maturity of the outstanding Notes required to take any of the actions described therein or to provide that certain additional provisions of this 96 Agreement cannot be modified or waived without the consent of the Holder of each outstanding Note affected thereby, or (5) except as otherwise permitted under Section 8.11, consent to the assignment or transfer by the Company of their respective rights or obligations under this Agreement, or (6) reduce the amount of Notes whose holders must consent to an amendment. No amendment or waiver of this Agreement will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or thereby impair any right consequent thereon. As used herein, the term this "Agreement" and references thereto shall mean this --------- Agreement as it may from time to time be amended or supplemented. 14.05. Counterparts. This Agreement may be executed in any number of --------------------- counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. 14.06. Reproduction. This Agreement, the other Transaction Documents --------------------- and all documents relating, hereto and thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by the Purchasers at the Closing Time (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished in connection herewith, may be reproduced by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and any original document so reproduced may be destroyed. Each Company agrees and stipulates that, to the extent permitted by Applicable Law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 14.06 shall not prohibit the Company, any other party hereto or any Holder from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction. 14.07. Headings. The headings of the sections and subsections hereof ----------------- are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 14.08. Governing Law; Submission to Jurisdiction; Venue. --------------------------------------------------------- (a) THIS AGREEMENT AND THE SECURITIES (OTHER THAN THE LP UNITS) SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. (b) If any action, proceeding or litigation shall be brought by any Purchaser or any Holder in order to enforce any right or remedy under this Agreement or any of the Securities, the Company hereby consents and will submit, and will cause each of its Subsidiaries to submit, to the jurisdiction of any state or federal court of competent jurisdiction sitting within the area comprising the Southern District of New York on the date of this Agreement. The Company hereby irrevocably waives any objection, including, but not limited to, any objection to the laying of venue or based on the grounds of forum non ----- --- conveniens which they may now or hereafter have to the bringing of any such - ---------- action, proceeding or litigation in such jurisdiction. The Company further agrees that it shall not, and shall cause its Subsidiaries not to, bring any action, proceeding or litigation arising out of this Agreement, the Securities or any other Transaction Document in any state or federal court other than any state or federal court of competent jurisdiction sitting within the area comprising the Southern District of New York on the date of this Agreement. (c) The Company hereby irrevocably designates CT Corporation System at an address in New York City designated at the Closing Time as the designee, appointee and agent of the Company to receive, for and on behalf of the Company, service of process in such jurisdiction in any action, proceeding or litigation with respect to this Agreement, the Securities or any of the other Transaction Documents. It is understood that a copy of such process served on such agent will be promptly forwarded by mail to the Company at its address set forth opposite its signature below, but the failure of the Company to have received such copy shall not affect in any way the service of such process. The Company further irrevocably consents to the service of process of any of the aforementioned courts in any such action, proceeding or litigation by the mailing of copies thereof by registered or certified mail, postage prepaid, to the Company at its said address, such service to become effective thirty (30) days after such mailing. (d) Nothing herein shall affect the right of any holder of a Note to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Company in any other jurisdiction. If service of process is made on a designated agent it should be made by either (i) personal delivery or (ii) mailing a copy of summons and complaint to the agent via registered or certified mail, return receipt requested. (e) THE COMPANY AND HOLDERS HEREBY WAIVE ANY AND ALL RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE SECURITIES. 14.09. Severability. If any provision of this Agreement is determined -------------------- to be illegal, invalid or unenforceable, such provision shall be fully severable to the extent of such illegality, invalidity or unenforceability and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions. 98 14.10. Entirety. This Agreement together with the other Transaction ----------------- Documents represents the entire agreement of the parties hereto and thereto, and supersedes all prior agreements and understandings, oral or written, if any, relating to the Transaction Documents or the transactions contemplated herein or therein. 14.11. Survival of Representations and Warranties. All --------------------------------------------------- representations and warranties and covenants and indemnities made by the Company herein shall survive the execution and delivery of this Agreement, the issuance and transfer of all or any portion of the Securities and Exchange Notes and the payment of principal of the Notes and the Exchange Notes and any other obligations hereunder, regardless of any investigation made at any time by or on behalf of the Purchasers or any other holder that is Affiliated with the Purchasers. All statements contained in any certificate delivered by or on behalf of the Company pursuant to this Agreement shall be deemed representations and warranties of the Company under this Agreement. 14.12. Incorporation. All Exhibits and Schedules attached hereto are ---------------------- incorporated as part of this Agreement as if fully set forth herein. 99 IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written. NASSAU BROADCASTING PARTNERS, L.P. By: Nassau Broadcasting Partners, Inc., as its General Partner By: /s/ Louis F. Mercatanti, Jr. ------------------------------------ Name: Louis F. Mercatanti, Jr. Title: President NASSAU FINANCE CORP. By: /s/ Louis F. Mercatanti, Jr. ------------------------------------ Name: Louis F. Mercatanti, Jr. Title: MERRILL LYNCH CAPITAL CORPORATION By: /s/ Stephen B. Paras ------------------------------------ Name: Stephen B. Paras Title: Managing Director OZ MASTER FUND, LTD. By: /s/ Daniel S. Och ------------------------------------ Name: Daniel S. Och Title: Managing Director 100 CAISSE DE DEPOT ET PLACEMENT DU QUEBEC By: /s/ Lucie Rousseau ------------------------------------ Name: Lucie Rousseau Title: By: /s/ Diane C. Farreau ------------------------------------ Name: Diane C. Farreau Title: THE BANK OF NOVA SCOTIA By: /s/ Vincent J. Fitzgerald, Jr. ------------------------------------ Name: Vincent J. Fitzgerald, Jr. Title: Authorized Signatory BANK OF MONTREAL By: /s/ Karen Klapper ------------------------------------ Name: Karen Klapper Title: Director EXHIBIT A --------- [FORM OF NOTE] THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR -------------- QUALIFIED UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT IS IN EFFECT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY IS SUBJECT TO THE TERMS OF THE PURCHASE AGREEMENT, DATED AS OF MAY 4, 2000 (THE "PURCHASE -------- AGREEMENT"), AMONG NASSAU BROADCASTING PARTNERS, L.P. (THE "COMPANY"), NASSAU - --------- ------- FINANCE CORP. AND THE PURCHASERS NAMED THEREIN. A COPY OF SUCH PURCHASE AGREEMENT IS AVAILABLE AT THE OFFICES OF THE COMPANY. NASSAU BROADCASTING PARTNERS, L.P. NASSAU FINANCE CORP. 13% (Resetting to 14%) [Series B]/1/ Senior Discount Note due 2010 No. _______ Nassau Broadcasting Partners, L.P., a Delaware limited partnership formed under the Delaware Revised Uniform Limited Partnership Act (the "Company", which term includes any successor under the Agreement hereinafter ------- referred to), and Nassau Finance Corp., a Delaware corporation ("Nassau ------ Finance", which term includes any successor under the Agreement hereinafter - ------- referred to) (together with the Company, the "Issuers") for value received, ------- promise to pay to ___________, or its registered assigns, the principal sum of [pro rata portion of $117,359,000.00] Dollars ($________), on May 1, 2010 and to pay interest thereon on November 1, 2005 and semiannually thereafter, on May 1 and November 1 in each year, from November 1, 2005, or from the most recent Interest Payment Date to which interest has been paid or duly provided for. The following information is supplied for purposes of Sections 1273 and 1275 of the Internal Revenue Code: _________________ A-1 Issue Date: May 4, 2000 Issue Price: $488.91 Original issue discount under Section 1273 of the Internal Revenue Code (for each $1,000 principal amount): $1,211.09 Principal Amount: $1,000.00 Yield to Maturity: 14.48% Interest Rate: 13% per annum, increasing to 14% per annum as and from November 1, 2000. Cash Interest Payment Dates: May 1 and November 1 of each year commencing November 1, 2005. Regular Record Dates: April 15 and October 15 of each year.
Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. A-2 IN WITNESS WHEREOF, each of the Issuers has caused this Note to be signed manually or by facsimile by its duly authorized officers. Date: May 4, 2000 NASSAU BROADCASTING PARTNERS, L.P. By: Nassau Broadcasting Partners, Inc., as its General Partner By: _________________________________________ Name: Title: NASSAU FINANCE CORP. By: _________________________________________ Name: Title: A-3 [REVERSE SIDE OF NOTE] Nassau Broadcasting Partners, L.P. Nassau Finance Corp. 13% (resetting to 14%) [Series B]/2/ Senior Discount Note due 2010 1. Principal and Interest. ---------------------- The Issuers shall pay the principal amount of this Note on May 1, 2010. The Issuers promise to pay interest on the principal amount of this Note on each Interest Payment Date, as set forth below, at the rate of 13% per annum (increasing to 14% per annum as and from November 1, 2000) except that additional interest accrued on this Note pursuant to the fourth paragraph of this Section 1 and pursuant to the Exchange and Registration Rights Agreement (as defined herein) will accrue at the rate or rates borne by the Notes from time to time as set forth in the Exchange and Registration Rights Agreement. Cash interest shall be payable on November 1, 2005 and thereafter semi-annually (to the Holders of record of the Notes (or any Predecessor Notes) at the close of business on the April 15 or October 15 immediately preceding the Interest Payment Date) on each Interest Payment Date, commencing on November 1, 2005. The Holder of this Note shall be entitled to the benefits of the Exchange and Registration Rights Agreement dated as of May 4, 2000 among the Issuers and the Purchasers named therein (the "Notes Registration Rights ------------------------- Agreement"). In the event that (a) the Exchange Offer Registration Statement - --------- (as such term is defined in the Notes Registration Rights Agreement) is not filed with the Securities and Exchange Commission on or prior to the earlier of (i) one month after consummation of a Public Equity Offering, to the extent the IPO Proceeds are insufficient to redeem all of the Notes or (ii) nine months after the Issue Date, (b) the Exchange Offer Registration Statement (as such term is defined in the Exchange and Registration Rights Agreement) has not been declared effective on or prior to the earlier of (i) three months after consummation of a Public Equity Offering or (ii) eleven months after the Issue Date, (c) the Exchange Offer (as such term is defined in the Exchange and Registration Rights Agreement) is not consummated or, if required, a Shelf Registration Statement (as such term is defined in the Exchange and Registration Rights Agreement) with respect to the Notes is not declared effective on or prior to the earlier of (i) four months after consummation of a Public Equity Offering or (ii) twelve months after the date of original issue of the Notes or (d) the Exchange Offer Registration Statement or the Shelf Registration Statement is declared effective but thereafter ceases to be effective or usable except in accordance with the Exchange and Registration Rights Agreement (each of the foregoing events, a "Registration Default"), the -------------------- ________________________ /2/ Include only for Exchange Notes. A-4 Issuers shall pay additional interest ("Special Interest") on the Notes (in ---------------- addition to the interest otherwise due on the Notes) in cash in arrears on each Interest Payment Date in an amount equal to 0.25% per annum of the principal amount of the Notes with respect to the first 90-day period following any of such events described in clauses (a) through (d) above, which rate shall be increased by an additional 0.25% per annum for each subsequent 90-day period until such Registration Default has been cured; provided that the aggregate increase in such annual interest rate shall in no event exceed one percent per annum for each subsequent 90-day period. Upon (w) the filing of the Exchange Offer Registration Statement after the period described in clause (a) above, (x) the effectiveness of the Exchange Offer Registration Statement after the period described in clause (b) above, (y) the consummation of the Exchange Offer or the effectiveness of a Shelf Registration Statement, as the case may be, after the period described in clause (c) above or (z) the cure of any event described in clause (d) above, such additional interest rate borne by this Note from the date of such filing, effectiveness, consummation or cure, as the case may be, shall cease to accrue; provided, however, that, if after any such additional interest ceases to accrue, a different event specified in clause (a), (b), (c) or (d) above occurs, such additional interest rate may again be increased pursuant to the foregoing provisions. This Note shall accrete original issue discount at the rate of 13% per annum (increasing to 14% per annum as and from November 1, 2000), compounded semiannually, to an aggregate principal amount of $1,000 by May 1, 2005, and shall bear cash interest at the rate of 14% per annum accruing from May 1, 2005, or from the most recent Interest Payment Date to which cash interest has been paid or duly provided for; provided that, if there is no existing default in the payment of interest and if this Note is authenticated between a Regular Record Date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such Interest Payment Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Issuers shall pay interest on overdue principal and premium, if any, and interest on overdue installments of interest, to the extent lawful, at a rate per annum equal to the rate of interest applicable to the Notes. 2. Method of Payment. ----------------- The Issuers shall pay cash interest (except defaulted interest) on the principal amount of the Notes on each May 1 and November 1 (commencing November 1, 2005) to the Persons who are Holders (as reflected in the Note Register at the close of business on the April 15 and October 15 immediately preceding the Interest Payment Date), in each case, even if the Note is cancelled on registration of transfer or registration of exchange after such Regular Record Date; provided that, with respect to the payment of principal, the Issuers will make payment to the Holder that surrenders this Note to it or any designated agent on or after the Final Maturity Date. The Issuers shall pay principal (and premium, if any) and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Issuers may pay principal (and premium, if any) and interest by check payable in immediately available funds. The Issuers may pay interest on the Notes either (a) by mailing a A-5 check for such interest to a Holder's registered address (as reflected in the Note Register) or (b) by wire transfer to an account located in the United States maintained by the payee. If a payment date is a date other than a Business Day at a place of payment, payment may be made at that place on the next succeeding day that is a Business Day and no interest shall accrue for the intervening period. 3. Purchase Agreement; Limitations. ------------------------------- The Issuers issued the Notes under a Units Purchase Agreement dated as of May 4, 2000 (the "Purchase Agreement"), among the Issuers and the Purchasers ------------------ named therein (the "Purchasers"). Capitalized terms herein are used as defined ---------- in the Purchase Agreement unless otherwise indicated. The terms of the Notes include those stated in the Purchase Agreement. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Note and the terms of the Purchase Agreement, the terms of the Indenture shall control. The Notes are unsecured senior obligations of the Issuers. The Purchase Agreement limits the aggregate principal amount at maturity of the Notes to $1,000.00. 4. Redemption. ---------- (a) If the Company consummates a Qualified Equity Issuance on or ----------------------------------------------------------------- before the 180th day after the Issue Date, the Issuers shall be required ------------------------------------------------------------------------ to redeem all of the Notes originally issued at a Redemption Price of 101% -------------------------------------------------------------------------- of the Accreted Value thereof, together with accrued and unpaid interest, ------------------------------------------------------------------------- if any, with the Net Cash Proceeds of such Qualified Equity Issuance. --------------------------------------------------------------------- (b) In the event that the Issuers have not redeemed all of the Notes in accordance with clause (a) by the 180th day after the Issue Date, the Issuers shall be required to redeem with the Net Cash Proceeds of any Public Equity Offering(s) all of the Notes not yet redeemed at the relevant Redemption Price set forth under clause (c) below, together with accrued and unpaid interest, if any, provided that the Company shall not be required to redeem any Notes pursuant to this clause (b) at (x) any time after March 31, 2001 or (y) such time as the Consolidated Leverage Ratio is 7.5 to 1 or lower and no Default or Event of Default has occurred and is continuing. If the aggregate Redemption Price of the Notes exceeds the Net Cash Proceeds of any Public Equity Offering, the Notes to be redeemed from such Net Cash Proceeds will be selected on a pro rata basis. (c) The Notes will be redeemable, at the option of the Issuers, as a whole or from time to time in part, on not less than 30 nor more than 60 days' prior notice at the following Redemption Prices (expressed as percentages of Accreted Value (on or prior to May 1, 2005) or principal amount at Maturity (after May 1, 2005), as applicable) together with accrued interest, if any, to the Redemption Date (subject to the right of Holders of record on the relevant Regular Record Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date), if redeemed during the 12-month periods indicated below: A-6 Issue Date to 180/th/ day after Issue Date 101.00% 181/st/ day after Issue Date to April 30, 2002 111.00 May 1, 2002 to April 30, 2003 110.00 May 1, 2003 to April 30, 2004 109.00 May 1, 2004 to April 30, 2005 108.00 May 1, 2005 to April 30, 2006 107.00 May 1, 2006 to April 30, 2007 105.25 May 1, 2007 to April 30, 2008 103.50 May 1, 2008 to April 30, 2009 101.75 May 1, 2009 until Maturity 100.00 Notwithstanding the foregoing, the Notes shall not be redeemable during the period commencing on the Issue Date and ending on the 180/th/ day after the Issue Date unless all of the Notes are redeemed out of the Net Cash Proceeds of a Qualified Equity Issuance. If less than all the Notes are to be redeemed, the Notes shall be redeemed pro rata from each Holder. Notice of Redemption will be mailed, first- class postage prepaid, at least 30 but not more than 60 days before the Redemption Date to each holder of Notes to be redeemed at its registered address. On and after the Redemption Date, original issue discount, on or prior to May 1, 2005 and cash interest, after May 1, 2005 will cease to accrue on Notes or portions thereof called for redemption and accepted for payment. 5. Repurchase upon a Change in Control, Asset Sales, Non-Consummation of --------------------------------------------------------------------- Aurora Acquisition or from Excess Debt Issuance Proceeds. -------------------------------------------------------- Upon the occurrence of a Change of Control, the Issuers are obligated to make an offer to purchase all outstanding Notes at a purchase price in cash of (i) 101% of the Accreted Value thereof as the Change in Control Purchase Date if such a date is on or before May 1, 2005 and (ii) 101% of the principal amount at Maturity of the Notes, thereof, plus accrued and unpaid cash interest, if any, to the Change in Control Purchase Date if such date is after May 1, 2005. Upon the occurrence of certain Asset Sales, the Issuers may be obligated to make offers to purchase Notes with a portion of the Net Cash Proceeds of such Asset Sales at a purchase price of (i) 100% of the Accreted Value of the Note thereof as the date of purchase if such date is on or before May 1, 2005 and (ii) 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase if such date is after May 1, 2005. In the event that the Aurora Acquisition has not been consummated by the 180/th/ day after the Issue Date, the Issuers shall be obligated to make an offer to purchase, at a price of 101% of the Accreted Value thereof plus accrued and unpaid interest, if any, Notes having an aggregate Accreted Value of 50% of the total Accreted Value of the Notes then outstanding. Upon the occurrence of Qualified Debt Issuances, the Issuers are obligated to make offers to purchase Notes with Excess Debt Issuance Proceeds at a purchase price of (i) 100% of the Accreted Value thereof as of the date of purchase if such date is on or before May 1, 2005 and (ii) 100% of the principal amount at maturity thereof, plus accrued and unpaid interest, if any, to the date of purchase if such date is after May 1, 2005. A-7 6. Denominations; Transfer; Exchange. --------------------------------- The Notes are in registered form without coupons, in denominations of $1,000 and multiples of $1,000 in excess thereof. A Holder may register the transfer or exchange of Notes in accordance with the Purchase Agreement. The Note Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Purchase Agreement. 7. Persons Deemed Owners. --------------------- A Holder may be treated as the owner of a Note for all purposes. 8. Amendment; Supplement; Waiver. ----------------------------- Subject to certain exceptions and conditions set forth in Section 14.04 of the Purchase Agreement, the Purchase Agreement or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding, and any existing default or compliance with any provision may be waived with the consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding. 9. Restrictive Covenants. --------------------- The Purchase Agreement contains certain covenants, including, without limitation, covenants with respect to the following matters: (i) Indebtedness; (ii) Restricted Payments; (iii) issuances and sales of Equity Interests of Restricted Subsidiaries; (iv) transactions with Affiliates; (v) Liens; (vi) disposition of proceeds of Asset Sales; (vii) dividend and other payment restrictions affecting Restricted Subsidiaries; (viii) consolidation, merger, conversion and certain transfers of assets; and (ix) investments in Unrestricted Subsidiaries. 10. Successor Persons. ----------------- When a successor person or other entity assumes all the obligations of its predecessor under the Notes and the Purchase Agreement, the predecessor person or other entity will be released from those obligations. 11. Remedies for Events of Default. ------------------------------ If an Event of Default, as defined in the Purchase Agreement, occurs and is continuing, the Holders of not less than 25% in aggregate principal amount at maturity of the Notes then outstanding may declare all the Notes to be immediately due and payable. If a bankruptcy or insolvency default with respect to an Issuer or any of its Significant Subsidiaries occurs and is continuing, the Notes automatically become immediately due and payable. Holders may not enforce the Purchase Agreement or the Notes except as provided in the Purchase Agreement. Subject to certain limitations, Holders of at least a majority in aggregate principal amount of the Notes then outstanding may direct the Trustee in its exercise of any trust or power. A-8 12. Governing Law. ------------- THIS NOTE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK EXCLUDING (TO THE EXTENT PERMISSIBLE BY LAW) ANY RULE OF LAW THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK. 13. Abbreviations. ------------- Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act). A-9 The Company will furnish to any Holder upon written request and without charge a copy of the Purchase Agreement. Requests may be made to: Nassau Broadcasting Partners, L.P. 619 Alexander Road 3rd Floor Princeton, New Jersey 08540 Attention: Michael S. Libretti, Executive Vice President of Operations and Finance A-10 [FORM OF TRANSFER NOTICE] FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto Insert Taxpayer Identification No. - ---------------------------------- _______________________________________________________________________________ _______________________________________________________________________________ (Please print or typewrite name and address including zip code of assignee) _______________________________________________________________________________ the within Note and all rights thereunder, hereby irrevocably constituting and appointing _______________________________________________________________________________ attorney to transfer such Note on the books of the Issuers with full power of substitution in the premises. [THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES EXCEPT PERMANENT OFFSHORE PHYSICAL CERTIFICATES] In connection with any transfer of this Note occurring prior to the date which is the earlier of the date of an effective Registration Statement or the Resale Restriction Termination Date, the undersigned confirms that without utilizing any general solicitation or general advertising that: [Check One] [ ] (a) this Note is being transferred in compliance with the exemption from registration under the Securities Act of 1933, as amended, provided by Rule 144A thereunder. or -- [ ] (b) this Note is being transferred other than in accordance with (a) above and documents are being furnished which comply with the conditions of transfer set forth in this Note and the Purchase Agreement. A-11 If none of the foregoing boxes is checked, the Issuers shall not be obligated to register this Note in the name of any Person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 9.01 of the Purchase Agreement shall have been satisfied. Date:_________________ ____________________________________ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever. Signature Guarantee:_____________________________ TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED. Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Issuers, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuers as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated:____________________ ___________________________________ NOTICE: To be executed by an executive officer A-12 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased in its entirety by the Issuers pursuant to Section 7.08, 7.09, 7.10 or 7.11 of the Purchase Agreement, check the box: If you want to elect to have only a part of the principal amount of this Note purchased by the Issuers pursuant to Section 7.08, 7.09, 7.10 or 7.11 of the Purchase Agreement, state the portion of such amount: $_______________. Dated: Your Signature: _______________________________________ (Sign exactly as name appears on the other side of this Note) Signature Guarantee: (Signature must be guaranteed by a financial institution that is a member of the Securities Transfer Agent Medallion Program ("STAMP"), the Stock Exchange Medallion ----- Program ("SEMP"), the New York Stock Exchange, Inc. ---- Medallion Signature Program ("MSP") or such other --- signature guarantee program as may be determined by the Security Registrar in addition to, or in substitution for, STAMP, SEMP or MSP, all in accordance with the Securities Exchange Act of 1934, as amended.) A-13 EX-4.6 15 0015.txt CREDIT AGMT, DTD 5/4/2000 ================================================================================ EXHIBIT 4.6 Nassau Broadcasting I, LLC, as Borrower, and THE GUARANTORS PARTY HERETO -------------------------- $144,000,000 CREDIT AGREEMENT Dated as of May 4, 2000 -------------------------- MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as Sole Book-Running Lead Arranger and Syndication Agent, and PNC Bank, National Association, as Administrative Agent, and The Bank of Nova Scotia, as Documentation Agent, and THE LENDERS PARTY HERETO ================================================================================ TABLE OF CONTENTS This Table of Contents is not part of the Agreement to which it is attached but is inserted for convenience of reference only. Page ---- Section 1. Definitions, Accounting Matters and Rules of Construction..........1 1.01. Certain Defined Terms..............................................1 1.02. Accounting Terms and Determinations...............................37 1.03. Classes and Types of Loans........................................37 1.04. Rules of Construction.............................................37 Section 2. Commitments, Letters of Credit, Conversions and Continuations, Fees, Register, Prepayments and Replacement of Lenders............38 2.01. Loans.............................................................38 2.02. Borrowings........................................................39 2.03. Letters of Credit.................................................39 2.04. Termination and Reductions of Commitments.........................44 2.05. Fees..............................................................45 2.06. Lending Offices...................................................45 2.07. Several Obligations of Lenders....................................45 2.08. Notes; Register...................................................46 2.09. Optional Prepayments and Conversions or Continuations of Loans....46 2.10. Mandatory Prepayments and Commitment Reductions...................47 2.11. Mandatory Offer to Purchase.......................................47 2.12. Replacement of Lenders............................................51 Section 3. Payments of Principal and Interest................................52 3.01. Repayment of Loans................................................52 3.02. Interest..........................................................52 Section 4. Payments; Pro Rata Treatment; Computations; Etc...................53 4.01. Payments..........................................................53 4.02. Pro Rata Treatment................................................54 4.03. Computations......................................................54 4.04. Minimum Amounts...................................................54 4.05. Certain Notices...................................................55 4.06. Non-Receipt of Funds by Administrative Agent......................55 4.07. Right of Setoff; Sharing of Payments; Etc.........................56 Section 5. Yield Protection, Etc.............................................57 5.01. Additional Costs..................................................57 5.02. Inability To Determine Interest Rate..............................58 5.03. Illegality........................................................59 -i- Page ---- 5.04. Treatment of Affected Loans.......................................59 5.05. Compensation......................................................60 5.06. Net Payments......................................................60 Section 6. Guarantee.........................................................62 6.01. The Guarantee.....................................................62 6.02. Obligations Unconditional.........................................63 6.03. Reinstatement.....................................................64 6.04. Subrogation; Subordination........................................64 6.05. Remedies..........................................................64 6.06. Instrument for the Payment of Money...............................65 6.07. Continuing Guarantee..............................................65 6.08. General Limitation on Guarantee Obligations.......................65 Section 7. Conditions Precedent..............................................65 7.01. Conditions to Effectiveness.......................................65 7.02. Conditions to Term A-1 Facility Loan and Term C Facility Loan.....69 7.03. Conditions to Term A-1 Facility Loan and Term C Facility Loan.....69 7.04. Conditions to Term A-2 Facility Loan..............................73 7.05. Determinations Under Section 7....................................73 Section 8. Representations and Warranties....................................74 8.01. Corporate Existence; Compliance with Law..........................74 8.02. Financial Condition; Etc..........................................74 8.03. Litigation........................................................75 8.04. No Breach; No Default.............................................75 8.05. Action............................................................75 8.06. Approvals.........................................................76 8.07. Representations and Warranties in the Acquisition Agreement.......76 8.08. ERISA and Foreign Employee Benefit Matters........................76 8.09. Taxes.............................................................77 8.10. Investment Company Act; Public Utility Holding Company Act; Other Restrictions...................................................77 8.11. Environmental Matters.............................................77 8.12. Environmental Investigations......................................78 8.13. Use of Proceeds...................................................78 8.14. Subsidiaries, Etc.................................................78 8.15. Ownership of Property; Liens......................................78 8.16. Security Interest; Absence of Financing Statements; Etc...........79 8.17. Licenses and Permits..............................................79 8.18. True and Complete Disclosure; Exchange Act Filings................79 8.19. Solvency..........................................................80 8.20. Contracts.........................................................80 8.21. Labor Matters.....................................................80 8.22. Subordinated Debt.................................................80 8.23. Intellectual Property.............................................80 8.24. Existing Indebtedness.............................................81 -ii- PAGE 8.25. FCC Matters.......................................................81 Section 9. Covenants.........................................................83 9.01. Financial Statements, Etc.........................................83 9.02. Litigation, Etc...................................................87 9.03. Existence; Compliance with Law; Payment of Taxes; Inspection Rights; Performance of Obligations; Etc........................87 9.04. Insurance.........................................................88 9.05. Limitation on Lines of Business...................................89 9.06. Limitation on Fundamental Changes, Acquisitions or Dispositions...89 9.07. Limitation on Liens and Negative Pledges..........................92 9.08. Prohibition on Disqualified Capital Stock; Limitation on Indebtedness and Contingent Obligations; Limitation on Designated Senior Indebtedness.................................93 9.09. Limitation on Investments; Limitation on Creation of Subsidiaries.95 9.10. Limitation on Dividend Payments...................................97 9.11. Financial Covenants...............................................99 9.12. Equal Security for Loans and Notes; Pledge or Mortgage of Real Property; Landlord Consents...................................101 9.13. Security Interests; Further Assurances...........................103 9.14. Compliance with Environmental Laws...............................104 9.15. Limitation on Transactions with Affiliates and Related Persons...104 9.16. Limitation on Accounting Changes; Limitation on Investment Company Status...............................................105 9.17. Limitation on Modifications of Certain Documents, Etc............105 9.18. Interest Rate Protection Agreements..............................105 9.19. Limitation on Certain Restrictions Affecting Subsidiaries........105 9.20. Additional Obligors..............................................106 9.21. Limitation on Payments or Prepayments of Indebtedness or Modification of Debt Documents................................106 9.22. Mortgage Matters.................................................106 9.23. Acquisition Documents............................................106 Section 10. Events of Default................................................109 Section 11. Agents...........................................................113 11.01. General Provisions...............................................113 11.02. Indemnification..................................................115 11.03. Consents Under Other Credit Documents............................115 11.04. Collateral Sub-Agents............................................115 Section 12. Miscellaneous....................................................116 12.01. Waiver...........................................................116 12.02. Notices..........................................................116 12.03. Expenses, Indemnification, Etc...................................117 12.04. Amendments, Etc..................................................119 12.05. Successors and Assigns...........................................123 12.06. Assignments and Participations...................................123 -iii- Page ---- 12.07. Survival.........................................................125 12.08. Captions.........................................................125 12.09. Counterparts; Interpretation; Effectiveness......................125 12.10. Governing Law; Submission to Jurisdiction; Waivers; Etc..........126 12.11. Confidentiality..................................................126 12.12. Independence of Representations, Warranties and Covenants........127 12.13. Severability.....................................................127 Signatures...................................................................S-1 -iv- ANNEX A - Commitments SCHEDULE 1.01(a) - Applicable Margins Before Trigger Date SCHEDULE 1.01(b) - Applicable Margins After Trigger Date SCHEDULE 1.01(c) - LMA Documents SCHEDULE 1.01(d) - Guarantors SCHEDULE 1.01(f) - Mortgaged Real Property at Closing Date SCHEDULE 1.01(g) - Borrower Stations SCHEDULE 3.01(b) - Amortization Schedule SCHEDULE 8.02(C) - Certain Contingent Obligations of Companies SCHEDULE 8.03 - Litigation SCHEDULE 8.09 - Tax Matters SCHEDULE 8.11 - Environmental Matters SCHEDULE 8.14 - Subsidiaries, Etc. SCHEDULE 8.15 - Property Matters SCHEDULE 8.16 - Security Interests SCHEDULE 8.21 - Labor Matters SCHEDULE 8.23 - Intellectual Property Matters SCHEDULE 8.24(A) - Indebtedness Outstanding as of the Closing Date SCHEDULE 8.24(B) - Certain Indebtedness to Remain Outstanding After the Closing Date SCHEDULE 8.26(a) - FCC Authorizations SCHEDULE 9.04 - Insurance SCHEDULE 9.07 - Certain Existing Liens SCHEDULE 9.09 - Investments SCHEDULE 9.15 - Existing Affiliate Agreements SCHEDULE 9.19 - Certain Restrictions Applicable to Subsidiaries EXHIBIT A-1 - Form of Revolving Note EXHIBIT A-2 - Form of Term A Facility Note EXHIBIT A-3 - Form of Term B Facility Note EXHIBIT A-4 - Form of Term C Facility Note EXHIBIT B - Form of Intercompany Note EXHIBIT C-1 - Form of Interest Rate Certificate EXHIBIT C-2 - Form of Solvency Certificate EXHIBIT D - Form of Security Agreement EXHIBIT E-1 - Form of Counsel Opinion at Closing Date EXHIBIT E-2 - Form of Local Counsel Opinion EXHIBIT F - Form of Notice of Assignment EXHIBIT G - Form of Notice of Borrowing EXHIBIT H - Form of Notice of Conversion/Continuation EXHIBIT I - Form of Joinder Agreement EXHIBIT J - Form of Foreign Lender Certificate EXHIBIT K - Form of Landlord Consent -v- EXHIBIT L - Form of Assignment Agreement EXHIBIT M - Form of Perfection Certificate -vi- CREDIT AGREEMENT dated as of May 4, 2000, among Nassau Broadcasting I, LLC, as Borrower; the Guarantors party hereto; each of the lenders that is a signatory hereto identified under the caption "LENDERS" on the signature pages hereto or that, pursuant to Section 12.06(b), shall become a "Lender" hereunder (individually, a "LENDER" and, collectively, the "LENDERS"); MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ("MERRILL LYNCH"), as sole book-running lead arranger (in such capacity, together with its successors in such capacity, the "LEAD ARRANGER"); PNC Bank, National Association, as administrative agent (in such capacity, together with its successors in such capacity, "ADMINISTRATIVE AGENT"); The Bank of Nova Scotia, as documentation agent (in such capacity, together with its successors in such capacity, "DOCUMENTATION AGENT"); MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as syndication agent (in such capacity, together with its successors in such capacity, "SYNDICATION Agent"). The parties hereto agree as follows: Section 1. DEFINITIONS, ACCOUNTING MATTERS AND RULES OF CONSTRUCTION. 1.01. CERTAIN DEFINED TERMS. As used herein, the following terms shall have the following meanings: "ABR LOANS" shall mean Loans that bear interest at rates based upon the Alternate Base Rate. "ACCOUNT" shall mean any account (as that term is defined in Section 9-106 of the UCC) of any Company arising from the sale or lease of goods or rendering of services. "ACQUISITION" shall mean, with respect to any Person, any transaction or series of related transactions for the direct or indirect (a) acquisition of all or substantially all of the Property of any other Person, or of any business or division of any other Person, (b) acquisition of more than 50% of the Equity Interests of any other Person, or otherwise causing any other Person to become a Subsidiary of such Person, or (c) merger or consolidation or any other combination with any other Person. "ACQUISITION CONSIDERATION" shall mean the purchase consideration for any Acquisition and all other payments made and liabilities incurred by any Company in exchange for, or as part of the purchase price for, any Acquisition, whether paid in cash or by exchange of Equity Interests or of Property or otherwise and whether payable at or prior to the consummation of such Acquisition or deferred for payment at any future time, whether or not any such future payment is subject to the occurrence of any contingency, and includes any and all payments and liabilities representing the purchase price and any assumptions of liabilities, "earn-outs" and other Profit Payment Agreements and non-competition agreements. "ACQUISITION DOCUMENTS" shall mean, collectively, the Aurora Acquisition Agreement, the Allentown Acquisition Agreement and the LMA Documents, and all documents, agreements and other instruments then or at any time thereafter executed and/or delivered in connection therewith or related thereto in each case as amended, amended and restated, supplemented, extended, renewed, replaced or otherwise modified from time to time. -2- "ADJUSTED NET INCOME" shall mean, for any period, Consolidated Net Income for such period, adjusted by excluding (to the extent taken into account in the calculation of such consolidated net income (loss)) the effect of (a) gains or losses for such period from Excluded Dispositions and Dispositions not in the ordinary course of business, and the tax consequences thereof, (b) gains or losses for such period from investments, (c) any non-recurring or extraordinary items of income (other than the proceeds of business interruption insurance) or expense for such period and the tax consequences thereof, and (d) the net income of any Subsidiary to the extent that the declaration or payment of dividends or similar distribution by such Subsidiary was not for the relevant period permitted, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Subsidiary or its stockholders. "ADMINISTRATIVE AGENT" see the introduction hereto. "ADMINISTRATIVE AGENT'S FEE LETTER" shall mean the fee letter dated April 17, 2000 between Borrower and Administrative Agent. "ADVANCE DATE" see Section 4.06. "AFFILIATE" shall mean, with respect to any Person, any other Person which directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, "CONTROL" (including, with its correlative meanings, "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise). "AFFILIATE TRANSACTION" see Section 9.15. "AGENT" shall mean any of Administrative Agent, Documentation Agent, Lead Arranger or Syndication Agent. "AGREEMENT" shall mean this Credit Agreement, as amended from time to time. "ALLENTOWN ACQUISITION" shall mean the Acquisition by Borrower of the Allentown Assets pursuant to the Acquisition Agreement and all other transactions contemplated by the Acquisition Agreement. "ALLENTOWN ACQUISITION AGREEMENT" shall mean the Asset Purchase Agreement dated as of February 29, 2000 among Borrower and Clear Channel Broadcasting, Inc. and Clear Channel Broadcasting Licenses, Inc., as amended, supplemented or otherwise modified from time to time pursuant to the terms thereof and this Agreement. "ALLENTOWN ASSETS" shall mean the Station Assets as defined in the Allentown Acquisition Agreement. "ALLENTOWN EQUITY INVESTMENT" see Section 7.01(iv). -3- "ALTERNATE BASE RATE" shall mean for any day, the higher of (i) the corporate base rate of interest announced by Administrative Agent from time to time, changing when said corporate base rate changes, and (ii) the Federal Funds Rate plus 0.50% PER ANNUM. The corporate base rate is not necessarily the lowest rate charged by Administrative Agent to its customers. "AMORTIZATION PAYMENT" shall mean each scheduled installment of payments on the Term Loans as set forth in Section 3.01(b). "APPLICABLE LENDING OFFICE" shall mean, for each Lender and for each Type of Loan, the "Lending Office" of such Lender (or of an Affiliate of such Lender) designated for such type of Loan on the signature pages hereof or such other office of such Lender (or of an Affiliate of such Lender) as such Lender may from time to time specify to Administrative Agent and Borrower as the office by which its Loans of such Type are to be made and maintained. "APPLICABLE MARGIN" shall be, for any Type and Class of Loan, (A) prior to the Trigger Date, the percentage PER ANNUM set forth on SCHEDULE 1.01(A) for such Type and Class of Loan, and (B) on and after the first date (the "TRIGGER DATE") after the Closing Date on which Borrower has delivered to the Lenders the financial statements and Interest Rate Certificate required by Sections 9.01(a), (b) and (e) and an Officers' Certificate demonstrating the then applicable Total Leverage Ratio for a fiscal quarter ended at least six months after the Closing Date, the Applicable Margin shall be the percentage PER ANNUM set forth on SCHEDULE 1.01(B) for such Type and Class of Loan set forth opposite the relevant Total Leverage Ratio in such Schedule as evidenced in the most recent Interest Rate Certificate delivered hereunder. After the Trigger Date, any change in the Total Leverage Ratio shall be effective to adjust the Applicable Margin on the fifth Business Day following the receipt by Administrative Agent of the Interest Rate Certificate most recently delivered pursuant to Section 9.01(e). If Borrower fails to deliver the financial statements or Interest Rate Certificate within the times specified in Sections 9.01(a), (b) and (e), the Total Leverage Ratio shall be deemed to be greater than or equal to 6.0:1.0 from the date of any such failure to deliver until Borrower delivers such Interest Rate Certificate and financial statements. "APPROVED FUND" shall mean, with respect to any Lender that is a fund or commingled investment vehicle that invests in loans, any other fund that invests in loans and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "AURORA" shall mean Aurora Management, Inc., a Delaware corporation. "AURORA ACQUISITION" shall mean the Acquisition by Borrower of Aurora Management, Inc. pursuant to the Acquisition Agreement and all other transactions contemplated by the Acquisition Agreement. "AURORA ACQUISITION AGREEMENT" shall mean the Purchase and Exchange Agreement dated as of March 24, 2000 among Holdings, Nassau Broadcasting Partners, Inc., and the sellers party thereto, as amended, supplemented or otherwise modified from time to time pursuant to the terms thereof and this Agreement. "AURORA DEBT" see Section 7.02(iv). -4- "AURORA DEBT REPAYMENT" shall mean the repayment of the Aurora Debt. "AURORA EQUITY INVESTMENT" see Section 7.01(iv). "BANKRUPTCY CODE" shall mean the United States Federal Bankruptcy Code of 1978, as amended or supplemented. "BORROWER" shall mean Nassau Broadcasting I, LLC, a Delaware limited liability company. "BORROWER STATIONS" shall mean the stations listed on Schedule 1.01(g). "BUSINESS DAY" shall mean any day, except a Saturday or Sunday, (a) on which commercial banks are not authorized or required to close in New York City and (b) if such day relates to a borrowing of, a payment or prepayment of principal of or interest on, a Continuation or Conversion of or into, or an Interest Period for, a LIBOR Loan or a notice by Borrower with respect to any such borrowing, payment, prepayment, Continuation, Conversion or Interest Period, that is also a day on which dealings in Dollar deposits are carried out in the London interbank market. "CAPITAL EXPENDITURES" shall mean, for any period any direct or indirect (by way of acquisition of securities of a Person or the expenditure of cash or the transfer of Property or the incurrence of Indebtedness) expenditures in respect of the purchase or other acquisition of fixed or capital assets determined in conformity with GAAP, excluding (i) normal replacement and maintenance programs properly charged to current operations, (ii) any expenditure made with the Net Available Proceeds of any Equity Issuance or Disposition Event to the extent such Net Available Proceeds are not required to be applied to the prepayment of the Loans in accordance with Sections 2.10(a)(ii) or 2.10(a)(iv), (iii) any expenditure made with the proceeds of any Excluded Disposition (other than sales of inventory in the ordinary course of business), (iv) expenditures in an amount not to exceed the sum of (x) the Net Available Proceeds of any Casualty Event to the extent such Net Available Proceeds are not required to be applied to the prepayment of the Loans in accordance with Section 2.10(a)(i) and (y) the amount of any applicable insurance deductibles with respect to such Casualty Event to the extent such amount is applied as set forth in clause (w) of Section 2.10(a)(i) within the period specified therein, (v) expenditures to effect Permitted Acquisitions, (vi) the purchase price of equipment to the extent that the consideration therefor consists of used or surplus equipment being traded in at such time or the proceeds of a concurrent sale of such used or surplus equipment and (vii) the purchase price of assets received to the extent the consideration therefor consists of Property disposed of in connection with Disposition permitted under Section 9.06(g). "CAPITAL LEASE," as applied to any Person, shall mean any lease of any Property by that Person as lessee which, in conformity with GAAP, is required to be classified and accounted for as a capital lease on the balance sheet of that Person. "CAPITAL LEASE OBLIGATIONS" shall mean, for any Person, all obligations of such Person to pay rent or other amounts under a Capital Lease, and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP. -5- "CASH EQUIVALENTS" shall mean, for any Person: (a) direct obligations of the United States of America, or of any agency thereof, or obligations guaranteed as to principal and interest by the United States of America, or by any agency thereof, in either case maturing not more than one year from the date of acquisition thereof by such Person; (b) time deposits, certificates of deposit or bankers' acceptances (including eurodollar deposits) issued by any bank or trust company organized under the laws of the United States of America or any state thereof and having capital, surplus and undivided profits of at least $500.0 million and a deposit rating of investment grade; (c) commercial paper rated A-1 or better by Standard & Poor's Corporation or P-1 or better by Moody's Investors Service, Inc., respectively, maturing not more than 180 days from the date of acquisition thereof by such Person; (d) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (a) above entered into with a bank meeting the qualifications described in clause (b) above; (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least A by Standard & Poor's Corporation or A by Moody's Investors Service, Inc.; or (f) money market mutual funds that invest primarily in the foregoing items. "CASUALTY EVENT" shall mean, with respect to any Property of any Person, any loss of title with respect to Real Property or any loss of or damage to or destruction of, or any condemnation or other taking (including by any Governmental Authority) of, such Property for which such Person or any of its Subsidiaries receives insurance proceeds or proceeds of a condemnation award or other compensation; PROVIDED, HOWEVER, no such event shall constitute a Casualty Event if (x) such proceeds or other compensation in respect thereof is less than $1.0 million and (y) all such proceeds and other compensation in respect of all such events since the Closing Date is less than $5.0 million. "CASUALTY EVENT" shall include but not be limited to any taking of all or any part of any Real Property of any Company, in or by condemnation or other eminent domain proceedings pursuant to any Law, or by reason of the temporary requisition of the use or occupancy of all or any part of any Real Property of any Company by any Governmental Authority, civil or military. "CERCLA" see Section 8.11. "CHANGE OF CONTROL" shall mean any transaction or event occurring on or after the date hereof as a direct or indirect result of which (a) if such transaction or event occurs prior to the consummation of an Initial Public Offering, the Permitted Holders collectively fail to beneficially own, directly or indirectly, Equity Interests of Holdings representing at least 80% (51% after satisfaction of all obligations under the Allentown Equity Investment and the Aurora Equity Investment) of the economic interests of all Equity Interests then outstanding of Holdings or the Permitted Holders collectively cease to have the ability to control Holdings; (b) if such transaction or event occurs after the consummation of an Initial Public Offering, any Person or any group (other than the Permitted Holders), shall (A) beneficially own (directly or indirectly) in the aggregate Equity Interests of Holdings having 20% or more of the aggregate voting power of all Equity Interests of Holdings at the time outstanding or (B) have the right or power to appoint a majority of the board of directors of Holdings; (c) if such transaction or event occurs after the consummation of an Initial Public Offering, during any period of two consecutive years, individuals who at the beginning of such period constituted the board of directors of Holdings (together with any new directors whose election by such board of directors or whose nomination for election by the shareholders of Holdings was approved by a vote of a majority -6- of the directors of Holdings then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute at least a majority of the board of directors of Holdings then in office; or (d) any event or circumstance constituting a "change of control" under any documentation evidencing or governing any Indebtedness of any Company or Holdings in a principal amount in excess of $10.0 million (other than under the Credit Documents) shall occur which results in an obligation of any Company or Holdings to prepay (by acceleration or otherwise), purchase, offer to purchase, redeem or defease all or a portion of such Indebtedness. For purposes of this definition, the terms "BENEFICIALLY OWN" and "GROUP" shall have the respective meanings ascribed to them pursuant to Section 13(d) of the Exchange Act, except that a Person or group shall be deemed to "beneficially own" all securities that such Person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time. "CLASS" see Section 1.03. "CLOSING DATE" see Section 7.01. "CLOSING DATE TRANSACTIONS" shall mean the Existing Credit Facilities Repayment and the entering into borrowings hereunder. "CODE" shall mean the United States Internal Revenue Code of 1986, as amended. "COLLATERAL" shall mean all of the Pledged Collateral, the Mortgaged Property (as defined in each Mortgage) and any other property, whether now owned or hereafter acquired, upon which a Lien securing the Obligations is granted or purported to be granted under any Security Document. "COLLATERAL ACCOUNT" see Section 9(d) of the Security Agreement. "COMMISSION" shall mean the United States Securities and Exchange Commission. "COMMITMENT LETTER" shall mean the Credit Facilities Commitment Letter among Merrill Lynch Capital Corporation and Borrower dated February 24, 2000, together with Exhibit A thereto. "COMMITMENTS" shall mean the Revolving Commitments and the Term Loan Commitments. "COMMUNICATIONS ACT" shall mean the United States Communications Act of 1934, and any similar or successor federal statute, and the rules and regulations of the FCC thereunder, all as amended and as the same may be in effect from time to time. "COMPANIES" shall mean Borrower and the Subsidiaries; and "COMPANY" shall mean any one of them. "CONSOLIDATED COMPANIES" shall mean Borrower and its Consolidated Subsidiaries. -7- "CONSOLIDATED EBITDA" shall mean, for any period, the sum (without duplication) of the amounts for such period of Adjusted Net Income, PLUS, in each case to the extent deducted in calculating such Adjusted Net Income, (1) income tax expense, (2) Consolidated Interest Expense, (3) depreciation and amortization expense, and (4) other non-cash items of expense, other than to the extent requiring an accrual or reserve for future cash expenses all as determined on a consolidated basis for Consolidated Companies and MINUS cash dividends or other distributions paid by Borrower to Holdings pursuant to Section 9.10(b)(i). Consolidated EBITDA shall be calculated on a pro forma basis and otherwise in accordance with GAAP and Regulation S-X under the Securities Act to give effect to any Acquisitions and Dispositions consummated during the fiscal period of Borrower ended on the applicable Test Date (or to the extent Consolidated EBITDA is used in the definition of Excess Cash Flow, the last day of the applicable fiscal year) as if each such Acquisition had been effected on the first day of such period and as if each such Disposition and Excluded Disposition had been consummated on the day prior to the first day of such period. In calculating Consolidated EBITDA on or prior to March 31, 2001, such calculation shall be made with adjustments for cost savings relating to the Allentown Acquisition and the Aurora Acquisition substantially consistent with the calculation of Consolidated EBITDA made in connection with satisfying the condition set forth in Section 7.01 (xii), such adjustment not to exceed (1) $700,000 for the Test Period ended June 30, 2000, (2) $525,000 for the Test Period ended September 30, 2000, (3) $350,000 for the Test Period ended December 31, 2000, and (4) $175,000 for the Test Period ended March 31, 2001. Consolidated EBITDA shall be calculated by adding back thereto all fees paid under the Time Brokerage Agreements during the relevant period to the extent the radio stations to which such Time Brokerage Agreements relate have been acquired by the Company pursuant to the exercise of an LMA Option. "CONSOLIDATED INTEREST EXPENSE" shall mean, for any period, all interest expense of Consolidated Companies for such period as determined on a consolidated basis for Consolidated Companies in accordance with GAAP plus or minus, as the case may be, the net amounts paid or received under Interest Rate Protection Agreements; PROVIDED, however, that for any Test Date following the Holdco Notes Interest Trigger Date, Consolidated Interest Expense shall include the annual cash interest payable during such period on the Holdco Notes following the Holdco Notes Interest Trigger Date. "CONSOLIDATED NET INCOME" shall mean, for any period, the consolidated net income (or loss) of Consolidated Companies for such period, determined in conformity with GAAP, but excluding the income of any Person (other than the Subsidiaries) in which any Company has an ownership interest, until such income has been received by a Company in a cash distribution and in any event not greater than Borrower's proportionate interest in the net income of such Person for the relevant period. "CONSOLIDATED SUBSIDIARY" shall mean, for any Person, each Subsidiary of such Person (whether now existing or hereafter created or acquired) the financial statements of which shall be (or should have been) consolidated with the financial statements of such Person in accordance with GAAP. "CONTINGENT OBLIGATION" shall mean, as to any Person, any direct or indirect liability of such Person, whether or not contingent, with or without recourse, (a) with respect to any Indebtedness, lease, dividend, letter of credit or other obligation (the "PRIMARY OBLIGATIONS") of another Person (the -8- "PRIMARY OBLIGOR"), including any obligation of such Person (i) to purchase, repurchase or otherwise acquire such primary obligations or any security therefor, (ii) to advance or provide funds for the payment or discharge of any such primary obligation, or to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (iv) otherwise to assure or hold harmless the holder of any such primary obligation against loss in respect thereof (each of (i)-(iv), a "GUARANTY OBLIGATION"); (b) with respect to any Surety Instrument (other than any Letter of Credit) issued for the account of such Person or as to which such Person is otherwise liable for reimbursement of drawings or payments; (c) to purchase any materials, supplies or other property from, or to obtain the services of, another Person if the relevant contract or other related document or obligation requires that payment for such materials, supplies or other property, or for such services, shall be made regardless of whether delivery of such materials, supplies or other property is ever made or tendered, or such services are ever performed or tendered; or (d) in respect of any Swap Contract; PROVIDED, HOWEVER, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection or standard contractual indemnities entered into, in each case in the ordinary course of business. The amount of any Contingent Obligation shall (x) in the case of a Guaranty Obligation, be deemed equal to the stated or determinable amount of the primary obligation in respect of which such Guaranty Obligation is made or, if not stated or if indeterminable, the maximum reasonably anticipated liability (as determined by the Borrower in its reasonable judgment) in respect thereof, and (y) in the case of other Contingent Obligations, be equal to the maximum reasonably anticipated liability (as determined by the Borrower in its reasonable judgment) in respect thereof. "CONTINUE," "CONTINUATION" and "CONTINUED" shall refer to the continuation pursuant to Section 2.09 of a LIBOR Loan from one Interest Period to the next Interest Period. "CONTRACTUAL OBLIGATION" shall mean as to any Person, any provision of any security issued by such Person or of any mortgage, security agreement, pledge agreement, indenture, credit agreement, securities purchase agreement, debt instrument, contract, agreement, instrument or other undertaking to which such Person is a party or by which it or any of its Property is bound or subject. "CONVERT," "CONVERSION" and "CONVERTED" shall refer to a conversion pursuant to Section 2.09 of one Type of Loans into another Type of Loans, which may be accompanied by the transfer by a Lender (at its sole discretion) of a Loan from one Applicable Lending Office to another. "COVERED TAXES" see Section 5.06(a). "CREDIT DOCUMENTS" shall mean this Agreement, the Notes, the L/C Documents and the Security Documents, as amended from time to time. "CREDIT FACILITIES" shall mean the Term Facilities and the Revolving Facility. "CREDITOR" shall mean each of (i) each Agent, (ii) each L/C Lender, (iii) each Lender, and (iv) each party to a Swap Contract relating to the Loans if at the date of entering into such Swap Contract such Person was a Lender or an Affiliate of a Lender. -9- "DEBT ISSUANCE" shall mean the incurrence by Holdings or any Company of any Indebtedness after the Closing Date (other than as permitted by Section 9.08). "DEFAULT" shall mean any event or condition that constitutes an Event of Default or that would become, with notice or lapse of time or both, an Event of Default. "DISPOSITION" shall mean (i) any conveyance, sale, lease, assignment, transfer or other disposition (including by way of merger or consolidation and including any Sale and Leaseback Transaction) of any Property (including Accounts of any Company and Equity Interests of any Person owned by any Company) (whether owned on the Closing Date or thereafter acquired) by any Company to any Person (other than (A) with respect to any Obligor, to any Obligor and (B) with respect to any other Company, to any Company), (ii) any issuance or sale by any Subsidiary of its Equity Interests to any Person (other than any Company), and (iii) any liquidating dividend or distribution received by any Company in respect of any Minority Interest, excluding, however, in each case any Excluded Disposition (except for purposes of defining the term "Excluded Disposition"). "DISPOSITION EVENT" shall mean the receipt by any Company of cash proceeds or cash distributions of any kind in consideration for a Disposition. "DISQUALIFIED CAPITAL STOCK" shall mean, with respect to any Person, any Equity Interest of such Person that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable (other than solely for Qualified Capital Stock), pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof (other than solely for Qualified Capital Stock) or exchangeable or convertible into debt securities of the issuer thereof at the sole option of the holder thereof, in whole or in part, on or prior to the date which is 90 days after the Final Maturity Date. "DIVIDEND PAYMENT" shall mean dividends (in cash, Property or obligations) on, or other payments or distributions on account of, or the setting apart of money for a sinking or other analogous fund for, or the purchase, redemption, retirement or other acquisition of, any Equity Interests or Equity Rights of any Company, but excluding dividends paid through the issuance of additional shares of Qualified Capital Stock and any redemption or exchange of any Qualified Capital Stock of such Obligor through the issuance of Qualified Capital Stock of such Obligor. "DOCUMENTATION AGENT" see the introduction hereto. "DOLLARS" and "$" shall mean lawful money of the United States of America. "DOMESTIC SUBSIDIARY" shall mean any Subsidiary other than a Foreign Subsidiary. "ELIGIBLE PERSON" shall mean (i) a commercial bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100.0 million; (ii) a commercial bank organized under the laws of any other country that is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having a combined capital and surplus in a dollar equivalent amount of at least $100.0 million; PROVIDED, HOWEVER, that such bank is acting through a branch or agency located in the -10- country in which it is organized or another country that is also a member of the OECD; (iii) an insurance company, mutual fund or other entity which is regularly engaged in making, purchasing or investing in loans or securities; or any other financial institution organized under the laws of the United States, any state thereof, any other country that is a member of the OECD or a political subdivision of any such country with assets, or assets under management, in a dollar equivalent amount of at least $100.0 million; (iv) any Affiliate of a Lender; (v) any other entity (other than a natural person) which is an "accredited investor" (as defined in Regulation D under the United States Securities Act of 1933, as amended) which extends credit or buys loans as one of its businesses or investing activities including, but not limited to, insurance companies, mutual funds and investment funds; and (vi) any other entity consented to by Lead Arranger, Administrative Agent and Borrower. With respect to any Lender that is a fund or commingled investment vehicle that invests in loans, any other fund or commingled investment vehicle that invests in loans and is managed or advised by the same investment advisor of such Lender or by an Affiliate of such investment advisor shall be treated as a single Eligible Person. "EMPLOYEE BENEFIT PLAN" shall mean an employee benefit plan (as defined in Section 3(3) of ERISA) that is maintained or contributed to by any ERISA Entity or with respect to which Borrower or a Subsidiary could incur liability. "ENVIRONMENTAL CLAIM" shall mean, with respect to any Person, any written notice, claim, demand or other communication (collectively, a "CLAIM") by any other Person alleging such Person's liability for any costs, cleanup costs, response or corrective action costs, damages to natural resources or other Property, personal injuries, fines or penalties arising out of or resulting from (i) the presence, Release or threatened Release into the environment, of any Hazardous Material at any location, whether or not owned by such Person, or (ii) any violation of any Environmental Law. The term "ENVIRONMENTAL CLAIM" shall include any claim by any Person seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from the presence of Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment. "ENVIRONMENTAL LAWS" shall mean any and all applicable laws, rules or regulations of any Governmental Authority, any orders, decrees, judgments or injunctions and the common law in each case as now or hereafter in effect, relating to pollution or protection of human health, safety or the environment, including without limitation, ambient air, indoor air, soil, or surface water, ground water, land or subsurface strata, and natural resources such as wetlands, flora or fauna, including, without limitation, those relating to Releases or threatened Releases of Hazardous Materials into the environment, or otherwise relating to the manufacture, processing, generation, distribution, use, treatment, storage, discharge, disposal, collection, transfer, transport or handling of Hazardous Materials. "EQUITY COMMITMENT LETTER" shall mean the Commitment Letter dated as of May 1, 2000 from Spectrum Equity Investors relating to the Aurora Equity Investment and the Allentown Equity Investment. "EQUITY INTERESTS" shall mean, with respect to any Person, any and all shares, interests, participations or other equivalents, including membership interests (however designated, whether voting or non-voting), of capital of such Person, including, if such Person is a partnership, partnership interests (whether general or limited) and any other interest or participation that confers on a Person -11- the right to receive a share of the profits and losses of, or distributions of assets of, such partnership, whether outstanding on the date hereof or issued after the Closing Date. "EQUITY ISSUANCE" shall mean any of (a) any issuance or sale after the Closing Date (excluding the issuance of capital stock solely in exchange for outstanding partnership interests upon the conversion of Holdings into a subchapter "C" corporation) by Borrower or Holdings of any Equity Interests (including any Equity Interests issued upon exercise of any Equity Rights) or any Equity Rights, or (b) the receipt by Borrower or Holdings after the Closing Date of any capital contribution (whether or not evidenced by any Equity Interest issued by the recipient of such contribution), excluding in each case, excluding, however, any Excluded Equity Issuance. The issuance or sale of any debt security convertible into or exchangeable or exercisable for any Equity Interests shall be deemed a Debt Issuance and not an Equity Issuance for purposes of Section 2.10(a). "EQUITY PROCEEDS" shall mean, as of any date of determination, the aggregate amount of the net proceeds received by Borrower from the sale or sales of, or capital contributions with respect to, its Equity Interests or Equity Rights, after deduction of costs, discounts and commissions incurred or accrued in connection with such sale or sales, to such date of determination. "EQUITY RIGHTS" shall mean, with respect to any Person, any outstanding subscriptions, options, warrants, commitments, preemptive rights or agreements of any kind (including any stockholders' or voting trust agreements) for the issuance, sale, registration or voting of, or outstanding securities convertible into, any additional shares of Equity Interests of any class, or partnership or other ownership interests of any type in, such Person. "ERISA" shall mean the United States Employee Retirement Income Security Act of 1974, as amended. "ERISA ENTITY" shall mean any member of an ERISA Group. "ERISA EVENT" shall mean (a) any "reportable event," as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Pension Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Pension Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived, the failure to make by its due date a required installment under Section 412(m) of the Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Pension Plan; (d) the incurrence by any ERISA Entity of any liability under Title IV of ERISA with respect to the termination of any Pension Plan; (e) the receipt by any ERISA Entity from the PBGC or a plan administrator of any notice relating to an intention to terminate any Pension Plan or to appoint a trustee to administer any Pension Plan, or the occurrence of any event or condition which could constitute grounds under ERISA for the termination of or the appointment of a trustee to administer, any Pension Plan; (f) the incurrence by any ERISA Entity of any liability with respect to the withdrawal or partial withdrawal from any Pension Plan or Multiemployer Plan; (g) the receipt by an ERISA Entity of any notice, or the receipt by any Multiemployer Plan from any ERISA Entity of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to -12- be, insolvent or in reorganization, within the meaning of Title IV of ERISA; (h) the making of any amendment to any Pension Plan which could result in the imposition of a lien or the posting of a bond or other security; or (i) the occurrence of a nonexempt prohibited transaction (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could result in liability to any Company. "ERISA GROUP" shall mean any Company and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with such Company, are treated as a single employer under Section 414 of the Code. "EVENT OF DEFAULT" see Section 10. "EXCESS CASH FLOW" shall mean for the relevant period, (A) the sum of (i) Consolidated EBITDA for such period (calculated for this definition by adding back the cash portion of all extraordinary or non-recurring items of income (other than from Dispositions) to the extent excluded in the calculation of Adjusted Net Income and by deducting the cash portion of all extraordinary or non-recurring items of expense to the extent excluded in the calculation of Adjusted Net Income); (ii) any net decrease in Working Capital during such period (except to the extent attributable to assets or Persons subject to a Disposition during such period); and (iii) cash received from the proceeds of any life insurance or "key man" policies during such period, MINUS (B) the sum of (i) Consolidated Interest Expense to the extent paid in cash for such period; (ii) the sum of all scheduled principal payments (other than pursuant to Section 2.10(a)(v)) on any Indebtedness (including Capital Leases and Term Loans pursuant to Section 3.01(b)) of Consolidated Companies made during such period from internally generated funds, all voluntary prepayments of term Indebtedness made during such period from internally generated funds and all prepayments of Revolving Loans made during such period from internally generated funds to the extent accompanied by a permanent reduction in the Revolving Commitment; (iii) cash Capital Expenditures made during such period by the Companies to the extent funded from internally generated funds; (iv) all cash income taxes actually paid to any Governmental Authority by Consolidated Companies during such period (other than any taxes relating to Dispositions or Excluded Dispositions not in the ordinary course of business) and dividends paid during such period by Borrower pursuant to Section 9.10(b)(ii) and 9.10(c); (v) cash dividends paid during such period by Borrower pursuant to Section 9.10(b)(iii) to the extent made with internally generated funds; (vi) cash paid during such period for any Acquisition permitted by Section 9.06, in each case to the extent made from internally generated funds; and (vii) any net increases (up to $2.0 million during any fiscal year) in Working Capital during such period (except to the extent attributable to assets or Persons subject to an Acquisition during such period). "EXCESS QUALIFIED DEBT ISSUANCE PROCEEDS" see Section 2.11. "EXCHANGE ACT" shall mean the United States Securities Exchange Act of 1934, as amended and the rules and regulations of the Commission promulgated thereunder. "EXCLUDED DISPOSITIONS" shall mean (i) Dispositions for fair market value resulting in less than $500,000 in aggregate proceeds in any fiscal year; (ii) an exchange of equipment or inventory for other equipment or inventory, provided that the Company effecting such exchange receives at least substantially equivalent value in such exchange for the Property disposed of, (iii) the attachment or granting of any Permitted Lien, the making of any Investment permitted by Section 9.09 and the -13- making of any Dividend Payment permitted by Section 9.10;and (iv) the sale of inventory in the ordinary course of business. "EXCLUDED EQUITY ISSUANCE" shall mean (i) any issuance of common Equity Interests of Holdings to the seller or sellers in consideration for a Permitted Acquisition, (ii) any issuance or sale by Holdings of Equity Interests of Holdings to employees, directors, officers or consultants pursuant to a benefit or compensation plan, (iii) any issuance of Qualified Capital Stock of Holdings to the extent that the proceeds thereof are used for a substantially contemporaneous purchase or redemption of Equity Interests of Holdings pursuant to Section 9.10(b)(iii), (iv) any issuance of Equity Interests by any Subsidiary to directors or nominees if resulting in DE MINIMIS proceeds, (v) any issuance of Equity Interests or the receipt of capital contributions by Holdings relating to the Allentown Equity Investment and the Aurora Equity Investment, and the receipt of capital contributions by Borrower from Holdings from the proceeds thereof, (vi) any issuance of Equity Interests by Borrower to, or the receipt of capital contributions from, Holdings from the proceeds of the issuance by Holdings of the Holdco Notes, (vii) any issuance of Equity Interests by Holdings pursuant to an Initial Public Offering consummated on or prior to March 31, 2001 (and the receipt of capital contributions by Borrower from Holdings from the net proceeds thereof) to the extent (a) such proceeds are used to repay the Holdco Notes and (b) such Equity Issuance is effected in lieu of the Allentown Equity Investment or the Aurora Equity Investment and (viii) the exercise of options issued as of the date hereof pursuant to the Amended and Restated Option Agreement dated as of April 27, 2000 among Nassau Broadcasting Company and the other parties thereto, as amended from time to time. "EXCLUDED TAXES" see Section 5.06(a). "EXISTING AFFILIATE AGREEMENTS" see Section 9.15. "EXISTING CREDIT FACILITIES" shall mean the Loan Agreement dated as of August 28, 1998 among Borrower, Amresco Commercial Finance, Inc., as Agent, and the other financial institutions party thereto (as amended through the date hereof). "EXISTING CREDIT FACILITIES REPAYMENT" shall mean the repayment of all Indebtedness and cancellation of all commitments to make extensions of credit under the Existing Credit Facilities. "EXISTING NOTES" shall mean the subordinated notes issued by Holdings and Nassau Broadcasting Partners, Inc. in favor of Spectrum, Grotech Partners IV, L.P., Noel P. Rahn and Toronto Dominion Capital (U.S.A.). "FAIR MARKET VALUE" shall mean, with respect to any Property, a price (after taking into account any liabilities relating to such Property), as determined by Borrower in good faith, that is within a reasonable range of prices which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing and able buyer, neither of which is under any compulsion to complete the transaction. "FCC" shall mean the United States Federal Communications Commission, or any other similar or successor agency of the federal government administering the Communications Act. -14- "FCC AUTHORIZATIONS" shall mean the licenses, construction permits, or other authorizations issued by the FCC necessary for the ownership and/or operations of the Radio Stations as currently conducted. "FEDERAL FUNDS RATE" shall mean, for any day, the rate PER ANNUM (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; PROVIDED, HOWEVER, that (a) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day and (b) if such rate is not so published for any Business Day, the Federal Funds Rate for such Business Day shall be the average rate quoted to Administrative Agent on such Business Day on such transactions by three federal funds brokers of recognized standing, as determined by Administrative Agent. "FEE LETTER" shall mean the Credit Facilities Fee Letter dated as of February 24, 2000 among Merrill Lynch Capital Corporation and Borrower. "FINAL MATURITY DATE" shall mean June 30, 2008. "FINANCIAL MAINTENANCE COVENANTS" shall mean the covenants set forth in Sections 9.11(a) through (d). "FIXED CHARGE COVERAGE RATIO" shall mean, for any Test Date, the ratio of (x) Consolidated EBITDA for the four fiscal quarters ending on such Test Date to (y) Fixed Charges for the four fiscal quarters ending on such Test Date. "FIXED CHARGES" shall mean, for any period, the sum of (i) Consolidated Interest Expense for such period to the extent paid or payable in cash during such period, (ii) the sum of all scheduled principal payments on any Indebtedness of Consolidated Companies (including, without duplication, any lease payments in respect of Capital Leases of Consolidated Companies attributable to the principal component thereof for such period but excluding any prepayment of a type contemplated by Section 2.10 or 2.11), (iii) all cash income tax expense actually paid to any Governmental Authority by Consolidated Companies for such period (other than taxes related to Dispositions or Excluded Dispositions not in the ordinary course of business), (iv) Capital Expenditures during such period to the extent paid from internally generated funds and (v) all dividends paid by Borrower during such period pursuant to Section 9.10(b)(ii). "FOREIGN LENDER CERTIFICATE" see Section 5.06. "FOREIGN PLAN" shall mean any employee benefit plan, program, policy, arrangement or agreement maintained or contributed to by, or entered into with, any Company with respect to employees employed outside the United States. "FOREIGN SUBSIDIARY" shall mean any direct or indirect Subsidiary organized outside of the United States as defined in Section 7701(a)(9) of the Code (or any successor provision). -15- "FUNDED INDEBTEDNESS" shall mean, at the date of determination thereof, any Indebtedness of any Company which by its terms matures more than one year after the date of calculation, and any such Indebtedness maturing within one year from such date which is renewable or extendible at the option of the obligor to a date more than one year from such date including, in any event, all current maturities and current sinking fund payments in respect of such Indebtedness whether or not required to be paid within one year from the date of its creation and Indebtedness in respect of Loans, in each case determined on a consolidated basis in conformity with GAAP. "FUNDING DATE" shall mean the date of the making of any extension of credit hereunder (including the Closing Date). "GAAP" shall mean generally accepted accounting principles set forth as of the relevant date in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination. "GOVERNMENTAL AUTHORITY" shall mean any government or political subdivision of the United States or any other country or any agency, authority, board, bureau, central bank, commission, department or instrumentality thereof or therein, including, without limitation, any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to such government or political subdivision. "GUARANTEE" shall mean the guarantee of each Guarantor pursuant to Section 6. "GUARANTEED OBLIGATIONS" see Section 6.01. "GUARANTORS" shall mean Holdings and each Subsidiary listed on SCHEDULE 1.01(D) and each Subsidiary that after the Closing Date guarantees the payment of the Obligations pursuant to Section 7.02(ix) or Section 9.20. "GUARANTY OBLIGATION" see the definition of Contingent Obligation. "HAZARDOUS MATERIAL" shall mean any pollutant, contaminant, toxic, hazardous or extremely hazardous substance, constituent or waste, or any other constituent, waste, material, compound or substance subject to regulation under any Environmental Law including, without limitation, petroleum or any petroleum product, including crude oil or any fraction thereof, polychlorinated biphenyls, urea-formaldehyde insulation and friable asbestos. "HOLDINGS" shall mean Nassau Broadcasting Partners, L.P. "HOLDCO NOTES" shall mean the $117,438,000 aggregate principal amount at maturity of 13% (resetting to 14%) Senior Discount Notes due 2010 issued by Holdings. -16- "HOLDCO NOTES AGREEMENT" shall mean the Purchase Agreement dated as of May 4, 2000 among Holdco, Merrill Lynch, Pierce, Fenner & Smith Incorporated and the purchasers named therein, pursuant to which the Holdco Notes were issued. "HOLDCO NOTES INTEREST TRIGGER DATE" shall mean May 4, 2005. "IN THE ORDINARY COURSE OF BUSINESS" shall mean in the ordinary course of business of the Companies. "INCUR" shall mean, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (including by conversion, exchange or otherwise), assume, guarantee or otherwise become liable in respect of such Indebtedness or other obligation or the recording, as required pursuant to GAAP or otherwise, of any such Indebtedness or other obligation on the balance sheet of such Person, or to grant or create a Lien upon any Property of such Person to secure any Indebtedness of another Person (and "INCURRENCE," "INCURRED" and "INCURRING" shall have meanings correlative to the foregoing). "INDEBTEDNESS" shall mean, for any Person, without duplication, (a) all indebtedness for borrowed money of such Person; (b) all obligations issued, undertaken or assumed by such Person as the deferred purchase price of Property or services (other than trade payables and accrued expenses arising in the ordinary course of business); (c) all obligations of such Person to reimburse or prepay any other Person in respect of amounts paid under letters of credit (including Letters of Credit), banker's acceptances or similar instruments, whether drawn or undrawn; (d) all obligations of such Person evidenced by notes, bonds (other than bid or performance bonds), debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of Property or businesses; (e) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to Property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such Property (other than operating leases)); (f) all Capital Lease Obligations of such Person; (g) all indebtedness of other Persons referred to in clauses (a) through (f) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in Property (including accounts and contracts rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such indebtedness (PROVIDED that the amount of indebtedness shall be deemed to be limited to the fair market value of such Property if such Person has not assumed or become liable for the payment of such indebtedness); (h) all obligations of such Person under synthetic leases; and (i) all Guaranty Obligations of such Person in respect of indebtedness or obligations of any other Person of the kinds referred to in clauses (a) through (h) above. Indebtedness shall not include accounts extended by suppliers in the ordinary course of business in connection with the purchase of goods and services. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is liable therefor. "INDEMNITEE" see Section 12.03(b). -17- "INITIAL PUBLIC OFFERING" shall mean a primary underwritten public offering of the common stock of Holdings at any time after the Closing Date, other than any public offering or sale pursuant to a registration statement on Form S-8 or a comparable form. "INITIAL NH REDEMPTION PAYMENT" means the payment by Holdings to Nassau Holdings Inc., as limited partner of Holdings, on the Closing Date of $2.5 million in respect of the redemption on the Closing Date of 54,128.07 Units of Partnership Interest held by Nassau Holdings, Inc. "INSOLVENCY PROCEEDING" shall mean, with respect to any Person, (a) any case, action or proceeding with respect to such Person before any court or by or before any other Governmental Authority relating to bankruptcy, insolvency, reorganization, liquidation, receivership, dissolution, sequestration, conservatorship, winding-up or relief of debtors (or the convening of a meeting or the passing of a resolution for or with a view to any of the foregoing), or (b) any assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other similar arrangement in respect of such Person's creditors generally or any substantial portion of its creditors. "INTELLECTUAL PROPERTY" see Section 8.23. "INTERCOMPANY NOTE" shall mean a promissory note substantially in the form of EXHIBIT B. "INTEREST COVERAGE RATIO" shall mean, for any Test Date, the ratio of (x) Consolidated EBITDA for the four fiscal quarters ending on such Test Date to (y) Consolidated Interest Expense for the four fiscal quarters ending on such Test Date. Notwithstanding the foregoing, until May 4, 2001, Consolidated Interest Expense shall equal the product of (A) Consolidated Interest Expense since the Closing Date to the date in question and (B) a fraction, the numerator of which is 365 and the denominator of which is the number of days since the Closing Date. "INTEREST PERIOD" shall mean, with respect to any LIBOR Loan, each period commencing on the date such LIBOR Loan is made or Converted from an ABR Loan or the last day of the next preceding Interest Period for such LIBOR Loan and (subject to the requirements of Section 2.09) ending on the numerically corresponding day in the first, second, third or sixth calendar month thereafter, as Borrower may select as provided in Section 4.05, except that each Interest Period that commences on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month. Notwithstanding the foregoing: (i) if any Interest Period for any Revolving Loan would otherwise end after the R/C Termination Date, such Interest Period shall end on the R/C Termination Date; (ii) no Interest Period for any Term Loan may commence before and end after any Principal Payment Date, unless, after giving effect thereto, the aggregate principal amount of the Term Loans having Interest Periods that end after such Principal Payment Date shall be equal to or less than the aggregate principal amount of the Term Loans scheduled to be outstanding after giving effect to the payments of principal required to be made on such Principal Payment Date; (iii) each Interest Period that would otherwise end on a day that is not a Business Day shall end on the next succeeding Business Day (or, if such next succeeding Business Day falls in the next succeeding calendar month, on the next preceding Business Day); and (iv) notwithstanding clauses (i) and (ii) above, no Interest Period shall have a duration of less than one month and, if the -18- Interest Period for any LIBOR Loan would otherwise be a shorter period, such Loan shall not be available hereunder as a LIBOR Loan for such period. "INTEREST RATE CERTIFICATE" shall mean an Officers' Certificate substantially in the form of EXHIBIT C-1, delivered pursuant to Section 9.01(e), demonstrating in reasonable detail the calculation of the Total Leverage Ratio as of the end of the fiscal period ending prior to the date of the delivery of such certificate. "INTEREST RATE PROTECTION AGREEMENT" shall mean, for any Person, an interest rate swap, cap or collar agreement or similar arrangement between such Person and one or more financial institutions providing for the transfer or mitigation of interest risks either generally or under specific contingencies. "INTERNALLY GENERATED FUNDS" shall mean funds not generated from the proceeds of any Loan, Debt Issuance, Equity Issuance, Disposition, insurance recovery or Indebtedness (in each case without regard to the exclusions from the definition thereof (other than sales of inventory in the ordinary course of business)). "INVENTORY" shall have the meaning as defined in the Uniform Commercial Code as in effect in the State of New York. "INVESTMENT" shall mean, for any Person: (a) the acquisition (whether for cash, Property, services or securities or otherwise) of Equity Interests, Equity Rights, bonds, notes, debentures or other securities of any other Person; (b) the making of any deposit with, or advance, loan or other extension of credit to, any other Person (including the purchase of Property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such Property to such Person); (c) any capital contribution to (by means of any transfer of cash or other Property to others or any payment for Property or services for the account or use of others) any other Person; and (d) the entering into, or direct or indirect incurrence, of any Guaranty Obligation with respect to Indebtedness or other liability of any other Person. In determining the aggregate amount of Investments outstanding at any particular time: (a) the amount of any Investment represented by a Guarantee shall be taken at not less than the principal amount of the Guaranteed Obligations still outstanding; (b) there shall be included as an Investment all interest accrued with respect to Indebtedness constituting an Investment unless and until such interest is paid; (c) there shall be deducted in respect of each such Investment any amount received as a return of capital (but only by repurchase, redemption, retirement, repayment, liquidating dividend or liquidating distribution); (d) there shall not be deducted in respect of any Investment any amounts received as earnings on such Investment, whether as dividends, interest or otherwise, except that accrued interest included as provided in the foregoing clause (b) may be deducted when paid; and (e) there shall not be deducted from or added to the aggregate amount of Investments any decrease or increase, respectively in the value thereof. "JOINDER AGREEMENT" shall mean a Joinder Agreement substantially in the form of EXHIBIT I. "LANDLORD CONSENTS" see Section 9.12(D). -19- "LAWS" shall mean, collectively, all common law and all international, foreign, federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents, including without limitation the interpretation thereof by any Governmental Authority charged with the enforcement thereof. "L/C DOCUMENTS" shall mean, with respect to any Letter of Credit, collectively, any other agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for (a) the rights and obligations of the parties concerned or at risk with respect to such Letter of Credit or (b) any collateral security for any of such obligations, each as the same may be modified and supplemented and in effect from time to time. "L/C INTEREST" shall mean, for each Revolving Lender, such Lender's participation interest (or, in the case of L/C Lender, L/C Lender's retained interest) in L/C Lender's liability under Letters of Credit and such Lender's rights and interests in Reimbursement Obligations and fees, interest and other amounts payable in connection with Letters of Credit and Reimbursement Obligations. "L/C LIABILITY" shall mean, without duplication, at any time and in respect of any Letter of Credit, the sum of (a) the undrawn face amount of such Letter of Credit, PLUS (b) the aggregate unpaid principal amount of all Reimbursement Obligations at such time due and payable in respect of all drawings made under such Letter of Credit. "L/C LENDER" shall mean PNC Bank, National Association or any of its Affiliates, or such other Lender or Lenders selected by Administrative Agent and reasonably satisfactory to Borrower, as the issuer of Letters of Credit under Section 2.03, together with its successors and assigns in such capacity. "LEAD ARRANGER" see the introduction hereto. "LEASE" shall mean any lease, sublease, franchise agreement, license, occupancy or concession agreement. "LENDER" and "LENDERS" see the introduction hereto. "LETTER OF CREDIT" see Section 2.03. "LIBO RATE" shall mean, for any LIBOR Loan for any Interest Period therefor, a rate PER ANNUM (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by Administrative Agent to be equal to the LIBOR Base Rate for such Loan for such Interest Period divided by 1 MINUS the Reserve Requirement (if any) for such Loan for such Interest Period. "LIBOR BASE RATE" shall mean, with respect to any LIBOR Loan for any Interest Period therefor, the rate PER ANNUM determined by Administrative Agent to be the arithmetic mean (rounded to the nearest 1/100th of 1%) of the offered rates for deposits in Dollars with a term comparable to such Interest Period that appears on the Dow Jones Market Screen 3750 (as defined below) at approximately 11:00 a.m., London, England time, on the second full Business Day preceding the first day of such Interest Period (as adjusted for maximum statutory reserves (if applicable)); PROVIDED, -20- HOWEVER, that (i) if no comparable term for an Interest Period is available, the LIBOR Base Rate shall be determined using the weighted average of the offered rates for the two terms most nearly corresponding to such Interest Period and (ii) if there shall at any time no longer exist a Dow Jones Market Screen 3750, "LIBOR BASE RATE" shall mean, with respect to each day during each Interest Period pertaining to LIBOR Loans comprising part of the same borrowing, the rate PER ANNUM equal to the rate at which Administrative Agent is offered deposits in Dollars at approximately 11:00 a.m., London, England time, two Business Days prior to the first day of such Interest Period in the London interbank market for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to its portion of the amount of such LIBOR Loan to be outstanding during such Interest Period. "DOW JONES MARKET SCREEN 3750" shall mean the display designated as Page 3750 on the Dow Jones Market Service (or such other page as may replace such page on such service for the purpose of displaying the rates at which Dollar deposits are offered by leading banks in the London interbank deposit markets). "LIBOR LOANS" shall mean Loans that bear interest at rates based on rates referred to in the definition of "LIBO Rate" in this Section 1.01. "LICENSE SUBSIDIARY" shall mean any Subsidiary of Borrower that (i) is organized in a state within the United States, (ii) has no assets other than FCC Authorizations of the Companies and DE MINIMIS other assets and conducts no activity except holding such FCC Authorizations and matters ancillary thereto, (iii) has no liabilities or obligations, including Contingent Obligations, other than the Guarantee and liabilities strictly related to its corporate existence incurred in the ordinary course (but not any trade credit or the like) and DE MINIMIS other obligations, and (iv) has no Liens, except, to the extent permitted by the FCC, Liens under the Security Documents in favor of Administrative Agent on behalf of the Creditors. "LIEN" shall mean, with respect to any Property, any mortgage, lien, pledge, claim, charge, security interest or encumbrance of any kind, any other type of preferential arrangement in respect of such Property having the effect of a security interest or any filing consented to by any Company of any financing statement under the UCC or any other similar notice of Lien under any similar notice or recording statute of any Governmental Authority, including any easement, right-of-way or other encumbrance on title to Real Property, and any agreement to give any of the foregoing. "LMA DOCUMENTS" shall mean the agreements listed on Schedule 1.01(c). "LMA LICENSEES" shall mean (i) Manahawkin Communications Corporation-WCHR(FM); (ii) Port Jervis Broadcasting Company, Inc.-WDLC(AM) and WTSX(FM); (iii) North Shore Broadcasting Corporation and Seashore Broadcasting Corporation-WOBM(AM) and WOBM-FM; (iv) Multicultural Radio Broadcasting, Inc.-WJHR(AM); and (v) Multicultural Radio Broadcasting, Inc.-WSBG(FM) and WVPO(AM). "LMA OPTION" shall mean Borrower's rights under the LMA Documents to acquire the assets described therein. "LMA STATIONS" shall mean (i) WCHR-FM, Trenton, NJ; (ii) WDLC(AM), Port Jervis, NY; (iii) WTSX(FM), Port Jervis, NY; (iv) WOBM(AM), Lakewood Township, NJ; (v) WOBM- -21- FM, Toms River, NJ; (vi) WJHR(AM), Flemington, NJ; (vii) WSBG(FM), Stroudsburg, PA; and (viii) WVPO(AM), Stroudsburg, PA. "LOANS" shall mean the Revolving Loans and the Term Loans. "LOSSES" of any Person shall mean the losses, liabilities, claims (including those based upon negligence, strict or absolute liability and liability in tort), damages, reasonable expenses, obligations, penalties, actions, judgments, encumbrances, liens, penalties, fines, suits, reasonable and documented costs or disbursements of any kind or nature whatsoever (including reasonable fees and expenses of counsel in connection with any Proceeding commenced or threatened in writing, whether or not such Person shall be designated a party thereto) at any time (including following the payment of the Obligations) incurred by, imposed on or asserted against such Person. "MAJORITY LENDERS" shall mean (i) at any time prior to the Closing Date, Lenders holding at least a majority of the aggregate amount of the Commitments, and (ii) at any time after the Closing Date, Lenders holding at least a majority of the sum of (without duplication) (a) the aggregate principal amount of outstanding Loans, PLUS (b) the aggregate amount of all L/C Liabilities, PLUS (c) the aggregate Unutilized Commitments then in effect. "MAJORITY PRO RATA LENDERS" see Section 12.04(i)(m). "MAJORITY REVOLVING LENDERS" shall mean (i) at any time prior to the Closing Date, Lenders holding at least a majority of the aggregate amount of the Revolving Commitment and (ii) at any time after the Closing Date, Lenders holding at least a majority of the sum of (without duplication) (a) the aggregate principal amount of outstanding Revolving Loans, PLUS (b) the aggregate amount of all L/C Liabilities, plus (c) the aggregate Unutilized R/C Commitments then in effect. "MARGIN STOCK" shall mean margin stock within the meaning of Regulations T, U and X. "MATERIAL ADVERSE CHANGE" shall mean, with respect to any Person, a material adverse change, or any condition or event that has resulted or could reasonably be expected to result in a material adverse change, in the business, results of operations, financial condition or assets of such Person, together with its Subsidiaries taken as a whole. "MATERIAL ADVERSE EFFECT" shall mean an event, circumstance, occurrence, or condition which has caused as of any date of determination any of (a) a material adverse effect, or any condition or event that has resulted or could reasonably be expected to result in a material adverse effect, on the business, results of operations, financial condition or assets of Borrower, together with the Subsidiaries taken as a whole, (b) a material adverse effect on the ability of the Obligors to consummate in a timely manner the Transactions or to perform any of their material obligations under any Credit Document or (c) a material adverse effect on the legality, binding effect or enforceability of any Credit Document or any of the material rights and remedies of any Creditor thereunder or the legality, priority or enforceability of the Lien on a material portion of the Collateral. "MERRILL LYNCH" see the introduction to this Agreement. -22- "MINORITY INTEREST" shall mean an Investment in any Person that is not a Subsidiary. "MOODY'S" shall mean Moody's Investors Service, Inc. "MORTGAGE" shall mean an agreement, including, but not limited to, a mortgage, deed of trust or any other document, creating and evidencing a Lien on a Mortgaged Real Property, which shall be in form and substance reasonably satisfactory to Administrative Agent, with such schedules and including such provisions as shall be necessary to conform such document to applicable or local law or as shall be customary under local law, as the same may at any time be amended in accordance with the terms thereof and hereof. "MORTGAGED REAL PROPERTY" shall mean (A) each Real Property identified on SCHEDULE 1.01(F) and (B) each Real Property, if any, which shall be subject to a Mortgage delivered after the Closing Date pursuant to Section 9.12. "MULTIEMPLOYER PLAN" shall mean a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA (i) to which any ERISA Entity is then making or accruing an obligation to make contributions, (ii) to which any ERISA Entity has within the preceding five plan years made contributions, including any Person which ceased to be an ERISA Entity during such five year period, or (iii) with respect to which any Company could incur liability. "NAIC" shall mean the National Association of Insurance Commissioners. "NET AVAILABLE PROCEEDS" shall mean: (i) in the case of any Disposition Event, the amount of Net Cash Payments received by any Company in connection with such Disposition Event; (ii) in the case of any Casualty Event, the aggregate amount of cash proceeds of insurance, condemnation awards and other compensation received by any Company in respect of such Casualty Event net of (A) fees and expenses incurred by such Company in connection with recovery thereof, (B) repayments of Indebtedness (other than Indebtedness hereunder) to the extent secured by a Lien on such Property that is permitted by the Credit Documents, and (C) any Taxes paid or payable by any Company in respect of the amount so recovered (after application of all credits and other offsets); and (iii) in the case of any Equity Issuance or any Debt Issuance, the aggregate amount of all cash received by Holdings or any Company in respect thereof net of all investment banking fees, discounts and commissions, legal fees, consulting fees, accountants' fees, underwriting discounts and commissions and other fees and expenses, actually incurred in connection therewith. "NET CASH PAYMENTS" shall mean, with respect to any Disposition Event, the aggregate amount of all cash payments (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, but only as and when received) received by any Company directly or indirectly in connection with such Disposition Event, net (without duplication) of (i) the amount of all fees and expenses paid -23- by any Company in connection with such Disposition Event (the "RELEVANT DISPOSITION"); (ii) any Taxes paid or estimated to be payable by any Company as a result of the Relevant Disposition (after application of all credits and other offsets); (iii) any repayments by any Company of Indebtedness (other than the Obligations) to the extent that such Indebtedness is secured by a Permitted Lien on the subject Property required to be repaid as a condition to the purchase or sale of such Property; (iv) amounts required to be paid to any Person (other than any Company) owning a beneficial interest in the subject Property; and (v) amounts reserved, in accordance with GAAP, against any liabilities associated with such Relevant Disposition and retained by any Company after such Relevant Disposition and related thereto, including pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Relevant Disposition, all as reflected in an Officers' Certificate delivered to Administrative Agent. "NON-QUALIFIED SUBSIDIARY" shall mean any Subsidiary other than a Qualified Subsidiary. "NON-U.S. LENDER" see Section 5.06(b). "NOTES" shall mean the Revolving Notes and the Term Loan Notes. "NOTICE OF ASSIGNMENT" shall mean a notice of assignment pursuant to Section 12.06 substantially in the form of EXHIBIT F. "NOTICE OF BORROWING" shall mean a notice of borrowing substantially in the form of EXHIBIT G. "OBLIGATIONS" shall mean all amounts, direct or indirect, contingent or absolute, of every type or description, and at any time existing, owing by any Obligor to any Creditor or any of its Related Parties or their respective successors, transferees or assignees pursuant to the terms of any Credit Document or any Swap Contract relating to the Loans or secured by any of the Security Documents, whether or not the right of such Person to payment in respect of such obligations and liabilities is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured and whether or not such claim is discharged, stayed or otherwise affected by any bankruptcy case or insolvency or liquidation proceeding. "OBLIGORS" shall mean Borrower and the Guarantors. "OFFICERS' CERTIFICATE" shall mean, as applied to any corporation, a certificate executed on behalf of such corporation by its Chairman of the Board (if an officer) or its Chief Executive Officer or its President or one of its Vice Presidents (or an equivalent officer) and by its Chief Financial Officer, Vice President-Finance or its Treasurer (or an equivalent officer) or any Assistant Treasurer in their official (and not individual) capacities. "OPTION AGREEMENT" means the Amended and Restated Option Agreement dated as of December 30, 1997 among Nassau Broadcasting Company and the other parties named therein. "ORGANIC DOCUMENT" shall mean, relative to any Person, its certificate of incorporation, its by-laws, its partnership agreement, its operating agreement, its memorandum and articles of -24- association, share designations or similar organization documents and all shareholder agreements, voting trusts and similar arrangements applicable to any of its authorized Equity Interests. "ORIGINAL LENDERS" shall mean the Lenders named on the signature pages hereof who were Lenders at the Closing Date. "OTHER TAXES" see Section 5.06(c). "OWNERSHIP REPORT" shall mean, with respect to any of the Borrower Stations, the reports and certifications filed with the FCC pursuant to 47 C.F.R. ss. 73.3615. "PARTICIPANT" see Section 12.06(c). "PAYMENT DATE" shall mean any Principal Payment Date and each date on which interest is due and payable on any Loan. "PAYOR" see Section 4.06. "PBGC" shall mean the United States Pension Benefit Guaranty Corporation or any successor thereto. "PENSION PLAN" shall mean an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code or Section 302 of ERISA and is maintained or contributed to by any ERISA Entity or with respect to which any Company could incur liability. "PERFECTION CERTIFICATE" shall mean a certificate substantially in the form of EXHIBIT M. "PERMITS" see Section 8.17. "PERMITTED ACQUISITION" shall mean any Acquisition effected in compliance with Section 9.06(h), (m), (n) or (o). "PERMITTED CUSTOMARY LIENS" shall mean (a) Liens imposed by any Governmental Authority for taxes, assessments or charges (other than any DE MINIMIS taxes, assessments or charges) not yet due or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the Companies, in accordance with GAAP; (b) Liens imposed by law which were incurred in the ordinary course of business, such as carriers', warehousemen's, landlords' and mechanics' Liens and other similar Liens arising in the ordinary course of business, in each case for sums the payment of which is not required by Section 9.03; (c) pledges or deposits under workers' compensation, unemployment insurance and other social security legislation (including the Federal Employer's Liability Act) or the deposits securing the liability to insurance carriers, in each case arising in the ordinary course of business; (d) pledges or deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business under insurance or self insurance agreements; (e) easements, rights-of-way, restrictions or minor defects or irregularities in title incurred in the ordinary course of business -25- and encumbrances consisting of zoning restrictions, easements, licenses, restrictions on the use of Real Property or minor imperfections in title thereto which, in the aggregate, are not material in amount, and which do not in any case materially detract from the value of the Real Property subject thereto or interfere with the ordinary conduct of the business of any Company; (f) exceptions to title as are set forth in the title insurance policy or title commitment delivered with respect to each Mortgaged Real Property; (g) Liens consisting of judgment or judicial attachment Liens (including pre-judgment attachment) in existence less than 60 days after the entry thereof or the enforcement of which is effectively stayed or payment of which is covered in full (subject to a customary deductible) by insurance or which do not otherwise result in an Event of Default under Section 10(h) or (n); (h) any obligations or duties affecting any of the Property of any Company to any municipality or public authority with respect to any franchise, grant, license or permit which do not materially impair the use of such Property for the purposes for which it is held; (i) leases, subleases, licenses or sublicenses granted to third Persons not interfering in any material respect with the business of any Company; (j) Liens arising from UCC financing statements regarding leases permitted by this Agreement; (k) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of custom duties in connection with the importation of goods so long as such Liens attach only to the imported goods; (l) Liens arising out of consignment or similar arrangements for the sale of goods entered into by any Company in the ordinary course of business; (m) Liens that are contractual rights of set-off; and (n) Liens on Intellectual Property to the extent such Liens arise from the granting of licenses to use such Intellectual Property in the ordinary course of business of any Company. "PERMITTED HOLDERS" shall mean, as of the date of determination, (i) Nassau Holdings, Inc. so long as controlled by Louis F. Mercatanti, Jr. or his Permitted Transferees, (ii) Nassau Broadcasting Partners, Inc. so long as controlled by Louis F. Mercatanti, Jr., Noel P. Rahn, Spectrum, Grotech Partners IV, L.P., Toronto Dominion Capital (U.S.A.) and (following the Aurora Acquisition) Banc America Capital Investors SBIC I, L.P. and their respective Permitted Transferees, (iii) Nassau Broadcasting Co., Inc., so long as controlled by Louis F. Mercatanti, Jr., and (iv) Noel P. Rahn, Spectrum, Grotech Partners IV, L.P., Toronto Dominion Capital (U.S.A.) and (following the Aurora Acquisition) Banc America Capital Investors SBIC I, L.P. and their respective Permitted Transferees. "PERMITTED INVESTMENTS" shall mean: (a) operating deposit accounts and certificates of deposit with banks in the ordinary course of business; (b) without duplication, Investments that constitute Indebtedness or Contingent Obligations permitted under Section 9.08; (c) extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the ordinary course of business and prepayments and other credits to suppliers made in the ordinary course of business; (d) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security or similar legislation; (e) pledges or deposits in connection with (i) the non-delinquent performance of bids, trade contracts (other than for borrowed money), leases or statutory obligations, (ii) contingent obligations on performance bonds, bid bonds, surety bonds or appeal bonds and (iii) other non-delinquent obligations of a like nature, in each case incurred in the ordinary course of business; (f) investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; and (g) cash and Cash Equivalents. "PERMITTED LIENS" see Section 9.07. -26- "PERMITTED OBLIGATIONS" shall mean: (a) Contingent Obligations in respect of operating leases; (b) Indebtedness and Contingent Obligations arising from honoring a check, draft or similar instrument against insufficient funds; PROVIDED, HOWEVER, that such Indebtedness is extinguished within two Business Days of its incurrence; (c) Swap Contracts entered into in the ordinary course of business as a BONA FIDE hedge and not for speculative purposes; (d) Contingent Obligations in connection with Excluded Dispositions or Dispositions permitted under Section 9.06, arising in connection with indemnification, customary purchase price adjustments and other agreements in respect of any contract relating to such Excluded Disposition or Disposition (expressly excluding, however, any Contingent Obligation in respect of any obligation of any third Person incurred in connection with the acquisition of the Property which is the subject of such Excluded Disposition or Disposition); (e) Indebtedness or Contingent Obligations of any Company to (including obligations in respect of letters of credit for the benefit of) any Person providing worker's compensation, health, disability or other employee benefits or property, casualty or liability insurance to any Company; and (f) Indebtedness or Contingent Obligations of any Company in respect of performance bonds, bid bonds, appeal bonds, surety bonds and similar obligations and trade letters of credit, in each case provided in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business, and any extension, renewal or refinancing thereof to the extent the amount of refinancing Indebtedness or Contingent Obligations is not greater than the amount of Indebtedness or Contingent Obligations being refinanced. "PERMITTED REFINANCING" shall mean, with respect to any Indebtedness or Contingent Obligation, any refinancing thereof, PROVIDED, HOWEVER, that: (a) no Default or Event of Default shall have occurred and be continuing at the time of incurrence thereof or would arise therefrom; (b) any such refinancing Indebtedness shall (i) not be on financial and other terms that are materially more onerous in the aggregate to any Company or the Lenders than the Indebtedness or Contingent Obligation being refinanced and shall not have defaults, rights or remedies more burdensome to any Company or Lender in any material respect than the Indebtedness being refinanced, (ii) not have a stated maturity or weighted average life that is shorter than that of the Indebtedness or Contingent Obligation being refinanced (provided that the stated maturity or weighted average life may be shorter if the stated maturity of any principal payment (including any amortization payments) is not earlier than the earlier of (1) the stated maturity in effect prior to such refinancing or (2) 90 days after the Final Maturity Date), (iii) if the Indebtedness or Contingent Obligation being refinanced is subordinated by its terms or by the terms of any agreement or instrument relating to such Indebtedness or Contingent Obligation, be at least as subordinate to the Obligations as the Indebtedness or Contingent Obligation being refinanced (and unsecured if the refinanced Indebtedness is unsecured), and (iv) be in a principal amount that does not exceed the principal amount so refinanced, plus accrued interest, PLUS any reasonable premium or other payment required to be paid in connection with such refinancing, PLUS, in either case, the amount of fees and reasonable expenses of any Company incurred in connection with such refinancing; (c) the Indebtedness to be refinanced is not outstanding more than 45 days after the date after the incurrence of the Indebtedness incurred to effect the refinancing thereof; and -27- (d) the sole obligor on such refinancing Indebtedness or Contingent Obligation shall be Borrower or the original obligor on such Indebtedness or Contingent Obligation being refinanced; PROVIDED, HOWEVER, that (I) any guarantor of the Indebtedness or Contingent Obligation being refinanced shall be permitted to guarantee the refinancing Indebtedness, (II) any Obligor shall be permitted to guarantee any such refinancing of any other Obligor, and (III) Holdco shall be the sole obligor on any refinancing of the Holdco Notes (or any refinancing thereof), and such refinanced Indebtedness shall not provide for any cash interest payments prior to the Holdco Notes Interest Trigger Date. "PERMITTED TRANSFEREES" means, with respect to any Person: (i) the referent Person's parents, spouse, siblings, children (natural or adopted), grandchildren or other issue; (ii) trusts the primary beneficiaries of which are any of the foregoing persons or any charitable organization designated by any of them, which trusts are controlled, directly or indirectly, by the referent Person and any of the persons under clauses (i) or (iv); (iii) corporations, partnerships, limited liability companies and other persons if at least 80% of the economic interest in any such person is owned by the referent person and any of the persons under clause (i), (ii) or (iii) or any charitable organization designated by any of them; and (iv) in the case of any person in clause (i), the heirs, executors, administrators or personal representatives upon the death of such person or upon the incompetency or disability of such person for the purposes of the protection and management of such individual's assets. "PERSON" shall mean any individual, corporation, company, voluntary association, partnership, joint venture, trust, unincorporated organization or government (or any agency, instrumentality or political subdivision thereof). "PLEDGED COLLATERAL" shall mean all Property pledged pursuant to the Security Agreement. "PREFERRED RETURN PAYMENT" means a payment on the Closing Date in the amount of $2.9 million to Nassau Broadcasting Company. "PRINCIPAL OFFICE" shall mean the principal office of Administrative Agent, located on the Closing Date at One PNC Plaza, 22nd Floor, 249 Fifth Avenue, Pittsburgh, PA 15222, or such other office as may be designated by Administrative Agent. "PRINCIPAL PAYMENT DATE" shall mean, with respect to any Term Loan, each Quarterly Date or other date set forth on SCHEDULE 3.01(B) on which a payment of principal is due with respect to such Term Loan. "PRIOR LIENS" shall mean Liens which, pursuant to the provisions of any Security Document, are or may be superior to the Lien of such Security Document. "PROCEEDING" shall mean any claim, counterclaim, action, judgment, suit, hearing, governmental investigation, arbitration or proceeding, including by or before any Governmental Authority and whether judicial or administrative. -28- "PROFIT PAYMENT AGREEMENT" shall mean any agreement to make any payment the amount of which is, or the terms of payment of which are, in any respect subject to or contingent upon the revenues, income, cash flow, earnings or profits (or the like) of any Person or business. "PRO FORMA BALANCE SHEET" see Section 8.02(E). "PRO FORMA DATE" see Section 8.02(E). "PROPERTY" shall mean any right, title or interest in or to property or assets of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible and including Equity Interests or other ownership interests of any Person. "PURCHASE OPTION" means the option to purchase LP Units granted to the option holders named in the Option Agreement. "QUALIFIED CAPITAL STOCK" shall mean with respect to any Person any Equity Interests of such Person which is not Disqualified Capital Stock. "QUALIFIED COMPANY" shall mean Borrower and each Qualified Subsidiary. "QUALIFIED DEBT ISSUANCE" means any issuance, whether in a public offering or a private placement, of debt securities of Borrower. "QUALIFIED SUBSIDIARY" shall mean any Wholly Owned Subsidiary of Borrower that is or is required to be a Guarantor and a party to the Security Agreement. "QUARTER" shall mean each three month period ending on March 31, June 30, September 30 and December 31. "QUARTERLY DATES" shall mean the last Business Day of each Quarter in each year, commencing with the last Business Day of the first full Quarter after the Closing Date; PROVIDED, HOWEVER, that solely for purposes of Sections 2.05(a) and (b), the Quarterly Dates shall commence with the last Business Day of the first full Quarter after the Closing Date. "RADIO STATIONS" shall mean the Borrower Stations and the LMA Stations. "R/C PERCENTAGE" shall mean, with respect to any Revolving Lender, the ratio of (a) the amount of the Revolving Commitment of such Lender to (b) the aggregate amount of the Revolving Commitments of all of the Lenders. "R/C TERMINATION DATE" shall mean the date that is the sixth anniversary of the Closing Date. "REAL PROPERTY" shall mean all right, title and interest of any Company (including, without limitation, any leasehold estate) in and to a parcel of real property owned or operated by any Company, whether by lease, license or other use or occupancy agreement, together with, in each case, -29- all improvements and appurtenant fixtures, equipment, personal property, easements and other property and rights incidental to the ownership, lease or operation thereof or thereon. "REDEEM" shall mean redeem, repurchase, repay, defease or otherwise acquire or retire for value; and "REDEMPTION" and "REDEEMED" have correlative meanings. "REFINANCE" shall mean refinance, renew, extend, replace, defease or refund, in whole or in part, including successively; and "REFINANCING" and "REFINANCED" have correlative meanings. "REGISTER" see Section 2.08. "REGULATION D" shall mean Regulation D (12 C.F.R. Part 204) of the Board of Governors of the United States Federal Reserve System. "REGULATIONS T, U AND X" shall mean, respectively, Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) and Regulation X (12 C.F.R. Part 224) of the Board of Governors of the United States Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time. "REGULATORY CHANGE" shall mean, with respect to any Lender, any change after the Closing Date in United States Federal, state or foreign law or regulations (including Regulation D) or the adoption or making after such date of any interpretation, directive or request applying to a class of banks or other financial institutions including such Lender of or under any Federal, state or foreign law or regulations (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) by any court or governmental or monetary authority or any other regulatory agency with proper authority, including non-governmental agencies or bodies, charged with the interpretation or administration thereof or by the NAIC. "REIMBURSEMENT OBLIGATIONS" shall mean, at any time, the obligations of Borrower then outstanding, or that may thereafter arise in respect of all Letters of Credit then outstanding, to reimburse amounts paid by L/C Lender in respect of any drawings under a Letter of Credit. "RELATED PARTIES" see Section 11.01. "RELATED PERSON" of any Person shall mean any other Person owning directly or indirectly (a) 5% or more of the outstanding common stock of such Person or (b) 5% or more of the Voting Equity Interests of such Person in each case, excluding any Person that files a Schedule 13G with respect to such Person pursuant to the Exchange Act (and is qualified to do so). "RELEASE" shall mean any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the environment. "RELEVANT DISPOSITION" see the definition of Net Cash Payments. "REPLACED LENDER" see Section 2.12. "REPLACEMENT LENDER" see Section 2.12. -30- "REQUIRED PAYMENT" see Section 4.06. "REQUIREMENT OF LAW" shall mean as to any Person, the Organic Documents of such Person, and any Law or determination of an arbitrator or any Governmental Authority, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject. "REQUISITE TRANCHE LENDERS" shall mean (i) with respect to Lenders having Revolving Commitments or Revolving Loans, Lenders having at least 85% of the aggregate sum of the Unutilized R/C Commitments, Revolving Loans and L/C Liabilities then outstanding, (ii) with respect to Lenders having Term A-1 Facility Loans or Term A-1 Facility Commitments, Lenders having at least 85% of the aggregate sum of the Term A-1 Facility Loans and Term A-1 Facility Commitments then outstanding, (iii) with respect to Lenders having Term A-2 Facility Loans or Term A-2 Facility Commitments, Lenders having at least 85% of the aggregate sum of the Term A-2 Facility Loans and Term A-2 Facility Commitments then outstanding, (iv) with respect to Lenders having Term B Facility Loans or Term B Facility Commitments, Lenders having at least 85% of the aggregate sum of the Term B Facility Loans and Term B Facility Commitments then outstanding, and (v) with respect to Lenders having Term C Facility Loans or Term C Facility Commitments, Lenders having at least 85% of the aggregate sum of the Term C Facility Loans and Term C Facility Commitments then outstanding. "RESERVE REQUIREMENT" shall mean, for any Interest Period for any LIBOR Loan, the average maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during such Interest Period under Regulation D by member banks of the United States Federal Reserve System in New York City with deposits exceeding one billion Dollars against "Eurocurrency liabilities" (as such term is used in Regulation D). "RESPONSIBLE OFFICER" shall mean the chief executive officer, the president or vice president of Borrower and, with respect to financial matters, the chief financial officer and the Director of Accounting of Borrower. "REVOLVING COMMITMENT" shall mean, for each Revolving Lender, the obligation of such Lender to make Revolving Loans in an aggregate principal amount at any one time outstanding up to but not exceeding the amount set opposite the name of such Lender on ANNEX A under the caption "Revolving Commitment" (as the same may be reduced from time to time pursuant to Section 2.04 or changed pursuant to Section 12.06(b)). The initial aggregate principal amount of the sum of the Revolving Commitments of all Lenders is $20.0 million. "REVOLVING FACILITY" shall mean the credit facility comprising the Revolving Commitments. "REVOLVING LENDERS" shall mean (a) on the Closing Date, the Lenders having a Revolving Commitment on the signature pages hereof and (b) thereafter, the Lenders from time to time holding Revolving Loans and a Revolving Commitment after giving effect to any assignments thereof permitted by Section 12.06(b). -31- "REVOLVING LOANS" see Section 2.01(a). "REVOLVING NOTES" shall mean the promissory notes substantially in the form of EXHIBIT A-1. "SALE AND LEASEBACK TRANSACTION" shall mean any arrangement, directly or indirectly, with any Person whereby it shall sell or transfer any Property used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such Property or other Property which it intends to use for substantially the same purpose or purposes as the Property being sold or transferred. "S&P" shall mean Standard & Poor's, a division of The McGraw Hill Companies. "SECURITIES ACT" shall mean the United States Securities Act of 1933, as amended, and all rules and regulations of the Commission promulgated thereunder. "SECURITY AGREEMENT" shall mean a Security Agreement substantially in the form of EXHIBIT D among the Obligors and Administrative Agent, as the same may be amended in accordance with the terms thereof and hereof or such other agreements reasonably acceptable to Administrative Agent as shall be necessary to comply with applicable Requirements of Law and effective to grant to Administrative Agent (on behalf of the Creditors) a perfected first priority security interest in the Pledged Collateral covered thereby. "SECURITY DOCUMENTS" shall mean the Security Agreement, the Mortgages (if any), the Landlord Consents and each other security document or pledge agreement required by applicable local law to grant a valid, perfected security interest in any Property acquired or developed pursuant to a Permitted Acquisition, and all UCC or other financing statements or instruments of perfection required by this Agreement, the Security Agreement or any Mortgage to be filed with respect to the security interests in Property and fixtures created pursuant to the Security Agreement or any Mortgage and any other document or instrument utilized to pledge as collateral for the Obligations any Property of whatever kind or nature. "SENIOR DEBT" shall mean, at any date, Total Debt MINUS the aggregate amount of Subordinated Debt of Consolidated Companies at such date, in each case determined on a consolidated basis in conformity with GAAP. "SENIOR LEVERAGE RATIO" shall mean, for any Test Date, the ratio of (x) Senior Debt at such Test Date to (y) Consolidated EBITDA for the four fiscal quarters ending on such Test Date. "SOLVENT" and "SOLVENCY" shall mean, for any Person on a particular date, that on such date (a) the fair value of the Property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts and liabilities beyond such Person's ability to pay as such debts and liabilities mature, (d) such Person is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Person's Property would constitute an unreasonably small capital and (e) such Person is able to pay its debts as they become due and payable. -32- "SPECTRUM" means Spectrum Equity Investors, L.P. and Spectrum Equity Investors II, L.P., and their respective successors. "SUBORDINATED DEBT" shall mean Indebtedness of any Company that is contractually subordinated to any other Indebtedness of such Company. "SUBSIDIARY" shall mean, with respect to any Person, any corporation, partnership or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person and/or one or more Subsidiaries of such Person. Unless the context clearly requires otherwise, all references to any Subsidiary shall mean a Subsidiary of Borrower. "SURETY INSTRUMENTS" shall mean all letters of credit (including standby and commercial), bankers' acceptances, bank guarantees, surety bonds and similar instruments. "SURVEY" shall mean a survey of any Mortgaged Real Property (and all improvements thereon): (i) prepared by a surveyor or engineer licensed to perform surveys in the state, province or country where such Mortgaged Real Property is located, (ii) dated (or redated) not earlier than 6 months prior to the date of delivery thereof unless there shall have occurred after the date of such survey any exterior construction on the site of such Mortgaged Real Property, in which event such survey shall be dated (or redated) after the completion of such construction or, if such construction shall not have been completed as of such date of delivery, not earlier than 20 days prior to such date of delivery, (iii) certified by the surveyor (in a manner acceptable to Administrative Agent) to Administrative Agent and (iv) complying in all respects with Requirements of Law. "SWAP CONTRACT" shall mean any agreement (including any master agreement and any schedule or agreement, whether or not in writing, relating to any single transaction) that is an interest rate swap agreement, basis swap, forward rate agreement, commodity swap, commodity option, equity or equity index swap or option, bond option, interest rate option, foreign exchange agreement, rate cap, collar or floor agreement, currency swap agreement, cross-currency rate swap agreement, swaption, currency option or any other similar agreement (including any option to enter into any of the foregoing) and is designed to protect any Company against fluctuations in interest rates, currency exchange rates, commodity prices, or similar risks (including any Interest Rate Protection Agreement entered into pursuant to Section 9.18). "SYNDICATION AGENT" see the introduction hereto. "TAX RETURNS" see Section 8.09. "TAXES" shall mean any and all taxes, imposts, duties, charges, fees, levies or other charges or assessments of whatever nature, including income, gross receipts, excise, real or personal property, sales, withholding, social security, retirement, unemployment, occupation, use, service, li- -33- cense, net worth, payroll, franchise, and transfer and recording, imposed by the Internal Revenue Service or any taxing authority (whether domestic or foreign, including any federal, state, U.S. possession, county, local or foreign government or any subdivision or taxing agency thereof), whether computed on a separate, consolidated, unitary, combined or any other basis, including interest, fines, penalties or additions to tax attributable to or imposed on or with respect to any such taxes, charges, fees, levies or other assessments. "TERM FACILITIES" shall mean the credit facilities comprising the Term A Facility, the Term B Facility and the Term C Facility, collectively. "TERM A FACILITY" shall mean the credit facility comprising the Term A Facility Commitments and the Term A Facility Loans. "TERM A FACILITY COMMITMENT" shall mean the Term A-1 Facility Commitments and the Term A-2 Facility Commitments, collectively. "TERM A FACILITY LENDERS" shall mean (a) on the Closing Date, the Lenders having Term A Facility Commitments on the signature pages hereof, and (b) thereafter, the Lenders from time to time holding Term A Facility Loans and Term A Facility Commitments after giving effect to any assignments thereof permitted by Section 12.06(b). "TERM A FACILITY LOANS" shall mean the Term A-1 Facility Loans and the Term A-2 Facility Loans, collectively. "TERM A FACILITY NOTES" shall mean the promissory notes substantially in the form of EXHIBIT A-2. "TERM A-1 FACILITY COMMITMENT" shall mean, for each Term A Facility Lender, the obligation of such Lender to make a Term A-1 Facility Term Loan in an amount up to but not exceeding the amount set opposite the name of such Lender on ANNEX A under the caption "Term A-1 Facility Commitment" (as the same may be changed pursuant to Section 12.06(b)). The initial aggregate principal amount of the sum of the Term A Facility Commitments of all Lenders is $33.0 million. "TERM A-1 FACILITY LOANS" see Section 2.01(b). "TERM A-1 FACILITY TERMINATION DATE" shall mean the earlier of (a) the 180th day after the Closing Date and (b) the receipt of final approval from the FCC to finance the Aurora Acquisition and the Aurora Debt Repayment and to pay related fees and expenses "TERM A-2 FACILITY COMMITMENT" shall mean, for each Term A Facility Lender, the obligation of such Lender to make a Term A Facility Term Loan in an amount up to but not exceeding the amount set opposite the name of such Lender on ANNEX A under the caption "Term A Facility Commitment" (as the same may be changed pursuant to Section 12.06(b)). The initial aggregate principal amount of the sum of the Term A Facility Commitments of all Lenders is $26.0 million. "TERM A-2 FACILITY LOANS" see Section 2.01(c). -34- "TERM A-2 FACILITY TERMINATION DATE" shall mean the 120th day after the Closing Date. "TERM B FACILITY" shall mean the credit facility comprising the Term B Facility Commitments and the Term B Facility Loans. "TERM B FACILITY COMMITMENT" shall mean, for each Term B Facility Lender, the obligation of such Lender to make a Term B Facility Term Loan in an amount up to but not exceeding the amount set opposite the name of such Lender on ANNEX A under the caption "Term B Facility Commitment" (as the same may be changed pursuant to Section 12.06(b)). The initial aggregate principal amount of the sum of the Term B Facility Commitments of all Lenders is $40.0 million. "TERM B FACILITY LENDERS" shall mean (a) on the Closing Date, the Lenders having Term B Facility Commitments on the signature pages hereof, and (b) thereafter, the Lenders from time to time holding Term B Facility Loans and Term B Facility Commitments after giving effect to any assignments thereof permitted by Section 12.06(b). "TERM B FACILITY LOANS" see Section 2.01(d). "TERM B FACILITY NOTES" shall mean the promissory notes substantially in the form of EXHIBIT A-3. "TERM C FACILITY" shall mean the credit facility comprising the Term C Facility Commitments and the Term C Facility Loans. "TERM C FACILITY COMMITMENT" shall mean, for each Term C Facility Lender, the obligation of such Lender to make a Term C Facility Term Loan in an amount up to but not exceeding the amount set opposite the name of such Lender on ANNEX A under the caption "Term C Facility Commitment" (as the same may be changed pursuant to Sectgion 12.06(b)). The initial aggregate principal amount of the sum of the Term C Facility Commitments of all Lenders is $25.0 million. "TERM C FACILITY LENDERS" shall mean (a) on the Closing Date, the Lenders having Term C Facility Commitments on the signature pages hereof, and (b) thereafter, the Lenders from time to time holding Term C Facility Loans and Term C Facility Commitments after giving effect to any assignments thereof permitted by Section 12.06(b). "TERM C FACILITY LOANS" see Section 2.01(e). "TERM C FACILITY NOTES" shall mean the promissory notes substantially in the form of EXHIBIT A-4. "TERM C FACILITY TERMINATION DATE" shall mean the earlier of (a) the 180th day after the Closing Date and (b) the receipt of final approval from the FCC to finance the Aurora Acquisition and the Aurora Debt Repayment and to pay related fees and expenses "TERM LOAN COMMITMENTS" shall mean the Term A Facility Commitments, the Term B Facility Commitments and the Term C Facility Commitments, collectively. -35- "TERM LOAN LENDERS" shall mean the Term A Facility Lenders, the Term B Facility Lenders and the Term C Facility Lenders, collectively. "TERM LOAN NOTES" shall mean the Term A Facility Notes, the Term B Facility Notes and the Term C Facility Notes, collectively. "TERM LOANS" shall mean the Term A Facility Loans, the Term B Facility Loans and the Term C Facility Loans, collectively. "TEST DATE" shall mean, for any Financial Maintenance Covenant, the last day of each fiscal quarter of Borrower included within any period set forth in the table for such Financial Maintenance Covenant. "TIME BROKERAGE AGREEMENTS" shall mean the (i) Time Brokerage Agreement, dated February 12, 1997 between Manahawkin Communications Corporation and Nassau Broadcasting Partners, L.P.; (ii) Time Brokerage Agreement, dated August 1, 1998 between Port Jervis Broadcasting Company, Inc. and Nassau Broadcasting Partners, L.P.; (iii) Time Brokerage Agreement dated July 1, 1996 between Nassau Broadcasting Partners, L.P. and North Shore Broadcasting Corporation and Seashore Broadcasting Corporation; (iv) Time Brokerage Agreement, dated January 21, 1999 between Multicultural Radio Broadcasting, Inc. and Nassau Broadcasting Partners, L.P.; and (v) Time Brokerage Agreement, dated November 12, 1998 between Multicultural Radio Broadcasting, Inc. and Nassau Broadcasting Partners, L.P. "TITLE COMPANY" shall mean First American Title Insurance Company or such other title insurance or abstract company as shall be designated by Administrative Agent. "TOTAL DEBT" shall mean, at any date, the aggregate amount of Indebtedness of Consolidated Companies at such date PLUS, if such date is on or after the Holdco Notes Interest Trigger Date, (other than for purposes of calculating Senior Debt) the aggregate principal amount of Holdco Notes outstanding on such date, in each case determined on a consolidated basis in conformity with GAAP. "TOTAL FUNDED INDEBTEDNESS" shall mean, at any date, the aggregate amount of Funded Indebtedness of Consolidated Companies as of such date determined on a consolidated basis in conformity with GAAP. "TOTAL LEVERAGE RATIO" shall mean, for any Test Date, the ratio of (x) Total Debt at such Test Date to (y) Consolidated EBITDA for the four fiscal quarters ending on such Test Date. "TRANCHE" shall mean (i) with respect to Lenders, each of the following classes of Lenders: (a) Lenders having Revolving Loans or Revolving Commitments, (b) Lenders having Term A Facility Commitments or Term A Facility Loans, (c) Lenders having Term B Facility Commitments or Term B Facility Loans and (d) Lenders having Term C Facility Commitments or Term C Facility Loans, and (ii) with respect to Loans, each of the following classes of Loans: (a) Revolving Loans or Revolving Commitments, (b) Term A Facility Commitments or Term A Facility Loans, (c) Term B Facility Commitments or Term B Facility Loans and (d) Term C Facility Commitments or Term C Facility Loans. -36- "TRANSACTION DOCUMENTS" shall mean the Allentown Acquisition Agreement, the Aurora Acquisition Agreement, the LMA Documents and this Agreement and in each case all documents related thereto and all exhibits, appendices, schedules and annexes to any thereof. "TRANSACTIONS" shall mean the Allentown Acquisition, the Aurora Acquisition , the exercise of the LMA Option, the Existing Credit Facilities Repayment, the Aurora Debt Repayment, the Allentown Equity Investment, the Aurora Equity Investment and the entering into borrowings hereunder. "TRIGGER DATE" see the definition of Applicable Margin. "TYPE" see Section 1.03. "UCC" shall mean the Uniform Commercial Code as in effect in the applicable state or other jurisdiction. "UNUTILIZED COMMITMENT" shall mean, at any time, the aggregate amount of Unutilized R/C Commitments, Unutilized Tranche A Commitments and Unutilized Tranche C Commitments at such time. "UNUTILIZED R/C COMMITMENT" shall mean, for any Revolving Lender, at any time, the excess of such Lender's Revolving Commitment at such time over the sum of (i) the aggregate outstanding principal amount of Revolving Loans made by such Lender and (ii) such Lender's R/C Percentage of the aggregate amount of L/C Liabilities at such time. "UNUTILIZED TRANCHE A COMMITMENT" shall mean, for any Term A Facility Lender, at any time, the excess of such Lender's Term A Facility Commitment at such time over the aggregate outstanding principal amount of Term A Facility Loans made by such Lender. "UNUTILIZED TRANCHE C COMMITMENT" shall mean, for any Term C Facility Lender, at any time, the excess of such Lender's Term C Facility Commitment at such time over the aggregate outstanding principal amount of Term C Facility Loans made by such Lender. "VOTING EQUITY INTEREST" shall mean, with respect to any Person, securities having ordinary voting power for the election of directors or other governing body of such Person. "WEIGHTED AVERAGE LIFE TO MATURITY" shall mean, on any date and with respect to the Revolving Commitments, or the Term Loans, an amount equal to (i) the sum, for each scheduled repayment of Term Loans to be made after such date, or each scheduled reduction of Revolving Commitments to be made after such date, of the amount of such scheduled repayment or reduction multiplied by the number of days from such date to the date of such scheduled prepayment or reduction divided by (ii) the aggregate principal amount of such Term Loans or such Revolving Commitments, as the case may be. "WHOLLY OWNED SUBSIDIARY" shall mean, with respect to any Person, any corporation, partnership or other entity of which all of the Equity Interests (other than, in the case of a corporation, directors' qualifying shares or nominee shares required under applicable law) are directly or indirectly -37- owned or controlled by such Person and/or one or more Wholly Owned Subsidiaries of such Person. Unless the context clearly requires otherwise, all references to any Wholly Owned Subsidiary shall mean a Wholly Owned Subsidiary of Borrower. "WITHDRAWAL LIABILITY" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part 1 of Subtitle E of Title IV of ERISA. "WORKING CAPITAL" shall mean an amount determined for Consolidated Companies equal to the sum of all current assets (other than cash and Cash Equivalents) less the sum of all current liabilities (other than the current portion of long-term Indebtedness). 1.02. ACCOUNTING TERMS AND DETERMINATIONS. Except as otherwise provided in this Agreement, all computations and determinations as to accounting or financial matters (including Financial Maintenance Covenants and other financial covenants) shall be made in accordance with GAAP consistently applied for all applicable periods, and all accounting or financial terms shall have the meanings ascribed to such terms by GAAP; PROVIDED, HOWEVER, that, if Borrower notifies Lead Arranger that Borrower wishes to amend the calculation of the Total Leverage Ratio for purposes of determining the Applicable Margins or to amend any covenant in Section 9, in either case to eliminate the effect of any change in GAAP (as to which Borrower shall give notice of such change to Lead Arranger and the Lenders within a reasonable time after such change) on the operation of such calculation or covenant (or if Lead Arranger notifies Borrower that the Majority Lenders wish to amend any such calculation or covenant for such purpose), then such calculation or Borrower's compliance with such covenant, as the case may be, shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such calculation or covenant is amended in a manner satisfactory to Borrower and the Majority Lenders. All financial statements to be delivered pursuant to this Agreement shall be prepared in accordance with GAAP. 1.03. CLASSES AND TYPES OF LOANS. Loans hereunder are distinguished by "Class" and by "Type". The "CLASS" of a Loan (or of a Commitment to make a Loan) refers to whether such Loan is a Revolving Loan, Term A Facility Loan, Term B Facility Loan or Term C Facility Loan, each of which constitutes a Class. The "TYPE" of a Loan refers to whether such Loan is an ABR Loan or a LIBOR Loan, each of which constitutes a Type. Loans may be identified by both Class and Type. 1.04. RULES OF CONSTRUCTION. (a) In each Credit Document, unless the context clearly requires otherwise (or such other Credit Document clearly provides otherwise), references to (i) the plural include the singular, the singular include the plural and the part include the whole; (ii) Persons include their respective permitted successors and assigns or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons; (iii) agreements (including this Agreement), promissory notes and other contractual instruments include subsequent amendments, assignments, and other modifications thereto, but only to the extent such amendments, assignments or other modifications thereto are not prohibited by their terms or the terms of any Credit Document; (iv) statutes and related regulations include any amendments of the same and any successor statutes and regulations; (v) unless otherwise expressly provided, any reference to any action of any Creditor by way of consent, approval or waiver shall be deemed modified by the phrase "in its/their sole discretion"; and -38- (vi) time shall be a reference to New York City time. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. (b) In each Credit Document, unless the context clearly requires otherwise (or such other Credit Document clearly provides otherwise), (i) "AMEND" shall mean "amend, restate, amend and restate, supplement or modify"; and "AMENDED," "AMENDING," and "AMENDMENT" shall have meanings correlative to the foregoing; (ii) in the computation of periods of time from a specified date to a later specified date, "FROM" shall mean "from and including"; "TO" and "UNTIL" shall mean "to but excluding"; and "THROUGH" shall mean "to and including"; (iii) "HEREOF," "HEREIN" and "HEREUNDER" (and similar terms) in any Credit Document refer to such Credit Document as a whole and not to any particular provision of such Credit Document; (iv) "INCLUDING" (and similar terms) shall mean "including without limitation" (and similarly for similar terms); (v) "OR" has the inclusive meaning represented by the phrase "and/or"; (vi) "SATISFACTORY TO" any Creditor shall mean in form, scope and substance and on terms and conditions satisfactory to such Creditor; (vii) references to "THE DATE HEREOF" shall mean the date first set forth above; (viii) "ASSET" and "PROPERTY" shall have the same meaning and effect and refer to all tangible and intangible assets and property, whether real, personal or mixed and of every type and description; and (ix) a "fiscal year" or a "fiscal quarter" are references to a fiscal year or fiscal quarter of Borrower. (c) In this Agreement unless the context clearly requires otherwise, any reference to (i) an Annex, Exhibit or Schedule is to an Annex, Exhibit or Schedule, as the case may be, attached to this Agreement and constituting a part hereof, and (ii) a Section or other subdivision is to a Section or such other subdivision of this Agreement. (d) This Agreement and the other Credit Documents are the result of negotiations among and have been reviewed by counsel to Agents, Borrower and the other parties, and are the products of all parties. Accordingly, they shall not be construed against the Lenders or Agents merely because of Agents' or Lenders' involvement in their preparation. Section 2. COMMITMENTS, LETTERS OF CREDIT, CONVERSIONS AND CONTINUATIONS, FEES, REGISTER, PREPAYMENTS AND REPLACEMENT OF LENDERS 2.01. LOANS. (a) REVOLVING LOANS. Each Revolving Lender severally agrees, on the terms and conditions of this Agreement, to make revolving loans (the "REVOLVING LOANS") to Borrower in Dollars during the period from and including the Closing Date to but not including the R/C Termination Date in an aggregate principal amount at any one time outstanding not exceeding the amount of the Revolving Commitment of such Lender as in effect from time to time; PROVIDED, HOWEVER, that in no event shall the sum of the aggregate principal amount of (without duplication) all Revolving Loans then outstanding PLUS the aggregate amount of all L/C Liabilities at any time exceed the aggregate amount of the Revolving Commitments as in effect at such time. Subject to the terms and conditions of this Agreement, during such period Borrower may borrow, repay and reborrow the amount of the Revolving Commitments by means of ABR Loans and LIBOR Loans. -39- (b) TERM A-1 FACILITY LOANS. Each Term A Facility Lender severally agrees, on the terms and conditions of this Agreement, to make a term loan ("TERM A-1 FACILITY LOANS") to Borrower in Dollars in a single draw on any date after the Closing Date and on or prior to the Term A-1 Facility Termination Date equal to the Term A-1 Facility Commitment of such Lender. Term A-1 Facility Loans that are repaid or prepaid may not be reborrowed. (c) TERM A-2 FACILITY LOANS. Each Term A Facility Lender severally agrees, on the terms and conditions of this Agreement, to make term loans ("TERM A-2 FACILITY LOANS") to Borrower in Dollars in two draws, on the Closing Date and on any date after the Closing Date and on or prior to the Term A-2 Facility Termination Date equal to the Term A-2 Facility Commitment of such Lender. Term A-2 Facility Loans borrowed on the Closing Date shall be limited to an aggregate amount of $5.0 million. Term A-2 Facility Loans that are repaid or prepaid may not be reborrowed. (d) TERM B FACILITY LOANS. Each Term B Facility Lender severally agrees, on the terms and conditions of this Agreement, to make a term loan ("TERM B FACILITY Loans") to Borrower in Dollars in a single draw on the Closing Date in an aggregate principal amount equal to the Term B Facility Commitment of such Lender. Term B Facility Loans that are repaid or prepaid may not be reborrowed. (e) TERM C FACILITY LOANS. Each Term C Facility Lender severally agrees, on the terms and conditions of this Agreement, to make a term loan ("TERM C FACILITY Loans") to Borrower in Dollars in a single draw on any date after the Closing Date and on or prior to the Term C Facility Termination Date in an aggregate principal amount equal to the Term C Facility Commitment of such Lender. Term C Facility Loans that are repaid or prepaid may not be reborrowed. (f) LIMIT ON LIBOR LOANS. No more than 10 separate Interest Periods in respect of LIBOR Loans may be outstanding at any one time. 2.02. BORROWINGS. Borrower shall give Administrative Agent notice of each borrowing hereunder as provided in Section 4.05. The form of such notice of borrowing shall be substantially in the form of EXHIBIT G. Not later than 12:00 noon New York City time on the date specified for each borrowing hereunder, each Lender shall make available the amount of the Loan or Loans to be made by it on such date to Administrative Agent, at an account specified by Administrative Agent maintained at the Principal Office, in immediately available funds, for the account of Borrower. Each borrowing of Revolving Loans shall be made by each Revolving Lender PRO RATA based on its R/C Percentage. The amounts so received by Administrative Agent shall, subject to the terms and conditions of this Agreement, be made available to Borrower by depositing the same no later than 1:00 p.m., in immediately available funds, in an account of Borrower maintained with Administrative Agent at the Principal Office designated by Borrower. 2.03. LETTERS OF CREDIT. Subject to the terms and conditions hereof, the Revolving Commitment may be utilized, upon the request of Borrower, in addition to the Revolving Loans provided for by Section 2.01(a), for standby and commercial documentary letters of credit (herein collectively called "LETTERS OF CREDIT") issued by L/C Lender for the account of any Obligor (PROVIDED, that Borrower shall be a co-applicant (and jointly and severally liable) with respect to each Letter of Credit issued for the account of any Subsidiary); PROVIDED, HOWEVER, that in no event shall (i) the aggregate -40- amount of all L/C Liabilities, PLUS the aggregate principal amount of the Revolving Loans then outstanding exceed at any time the Revolving Commitments as in effect at such time, (ii) the sum of the aggregate principal amount of Revolving Loans then outstanding made by any Revolving Lender PLUS such Lender's R/C Percentage of the aggregate amount of all L/C Liabilities exceed such Lender's Revolving Commitment as in effect at such time, (iii) the outstanding aggregate amount of all L/C Liabilities exceed $5.0 million, (iv) without the consent of the L/C Lender the face amount of any Letter of Credit be less than $250,000, (v) the expiration date of any Letter of Credit extend beyond the earlier of (x) the fifth Business Day preceding the R/C Termination Date and (y) the date twelve months following the date of such issuance for standby Letters of Credit or 180 days after the date of such issuance for commercial documentary Letters of Credit, unless the Majority Revolving Lenders have approved such expiry date in writing (but never beyond the fifth Business Day prior to the R/C Termination Date); PROVIDED, HOWEVER, that any standby Letter of Credit may be automatically extendible for periods of up to one year (but never beyond the fifth Business Day preceding the R/C Termination Date) so long as such Letter of Credit provides that L/C Lender retains an option satisfactory to L/C Lender to terminate such Letter of Credit prior to each extension date, unless all of the Revolving Lenders have approved such expiry date in writing, (vi) L/C Lender issue any Letter of Credit after it has received notice from Borrower or the Majority Revolving Lenders stating that a Default exists until such time as L/C Lender shall have received written notice of (x) rescission of such notice from the Majority Revolving Lenders, (y) waiver of such Default in accordance with this Agreement or (z) Administrative Agent's good faith determination that such Default has ceased to exist, or (vii) a commercial letter of credit be issued in a currency other than Dollars nor at a tenor other than sight. The following additional provisions shall apply to Letters of Credit: (a) Borrower shall give Administrative Agent at least three Business Days' irrevocable prior notice (effective upon receipt) pursuant to a Letter of Credit application satisfactory to L/C Lender specifying the date (which shall be no later than thirty days preceding the R/C Termination Date) each Letter of Credit is to be issued and describing in reasonable detail the proposed terms of such Letter of Credit (including the beneficiary thereof) (including whether such Letter of Credit is to be a commercial Letter of Credit or a standby Letter of Credit). Upon receipt of any such notice, Administrative Agent shall advise L/C Lender of the contents thereof. Each Lender hereby authorizes L/C Lender to issue, and perform its obligations under, Letters of Credit. Letters of Credit shall be issued in accordance with the customary procedures of L/C Lender, which may include an application for Letters of Credit. L/C Lender may refuse to issue any Letter of Credit the form of which is not reasonably satisfactory to it. If there is any conflict between the procedures or any Letter of Credit application required by L/C Lender and this Agreement, this Agreement shall govern. (b) On each day during the period commencing with the issuance by L/C Lender of any Letter of Credit and until such Letter of Credit shall have expired or been terminated, the Revolving Commitment of each Revolving Lender shall be deemed to be utilized for all purposes hereof in an amount equal to such Lender's R/C Percentage of the then undrawn face amount of such Letter of Credit plus the amount of any unreimbursed drawings thereunder. Each Revolving Lender (other than L/C Lender) severally agrees that, upon the issuance of any Letter of Credit hereunder, it shall automatically acquire a participation in L/C Lender's obligation to fund drawings and rights under such Letter of Credit in an amount equal to such Lender's R/C Percentage of such obligations and rights, and each Revolving Lender (other -41- than L/C Lender) thereby shall absolutely, unconditionally and irrevocably assume, as primary obligor and not as surety, and shall be unconditionally obligated to L/C Lender to pay and discharge when due, its R/C Percentage of L/C Lender's obligation to fund drawings under such Letter of Credit. L/C Lender shall be deemed to hold a L/C Liability in an amount equal to its retained interest in the related Letter of Credit after giving effect to such acquisition by the Revolving Lenders other than L/C Lender of their participation interests. (c) In the event that L/C Lender has determined to honor a drawing under a Letter of Credit, L/C Lender shall promptly notify Borrower (through Administrative Agent) of the amount paid by L/C Lender and the date on which payment is to be made to such beneficiary. Borrower hereby unconditionally agrees to pay and reimburse L/C Lender for the amount of payment under such Letter of Credit, together with interest thereon at the Alternate Base Rate plus the Applicable Margin applicable to Revolving Loans from the date payment was made to such beneficiary to the date on which payment is due, not later than the next Business Day after the date on which Borrower receives such notice from L/C Lender (or the second Business Day thereafter if such notice is received on a date that is not a Business Day or after 11:00 a.m. New York City time on a Business Day). Any such payment due from Borrower and not paid on the required date shall bear interest at rates specified in Section 3.02(b). (d) Forthwith upon its receipt of a notice referred to in clause (c) of this Section 2.03, Borrower shall advise L/C Lender whether or not Borrower intends to borrow hereunder to finance its obligation to reimburse L/C Lender for the amount of the related demand for payment and, if it does, submit a notice of such borrowing as provided in Section 4.05. In the event that Borrower fails to so advise Administrative Agent, or if Borrower fails to reimburse L/C Lender for a demand for payment under a Letter of Credit by the next Business Day after the date of such notice, Administrative Agent shall give each Revolving Lender prompt notice of the amount of the demand for payment, specifying such Lender's R/C Percentage of the amount of the related demand for payment. (e) Each Revolving Lender (other than L/C Lender) shall pay to Administrative Agent for account of L/C Lender at the Principal Office in Dollars and in immediately available funds, the amount of such Lender's R/C Percentage of any payment under a Letter of Credit upon not less than one Business Day's actual notice by L/C Lender (through Administrative Agent) to such Revolving Lender requesting such payment and specifying such amount. Subject to the proviso to the last paragraph of this Section 2.03, each such Revolving Lender's obligation to make such payments to Administrative Agent for the account of L/C Lender under this clause (e), and L/C Lender's right to receive the same, shall be absolute and unconditional and shall not be affected by any circumstance whatsoever, including (i) the failure of any other Revolving Lender to make its payment under this clause (e), (ii) the financial condition of Borrower or the existence of any Default or (iii) the termination of the Commitments. Each such payment to L/C Lender shall be made without any offset, abatement, withholding or reduction whatsoever. (f) Upon the making of each payment by a Revolving Lender to L/C Lender pursuant to clause (e) above in respect of any Letter of Credit, such Lender shall, automatically and without any further action on the part of Administrative Agent, L/C Lender or such Lender, -42- acquire (i) a participation in an amount equal to such payment in the Reimbursement Obligation owing to L/C Lender by Borrower hereunder and under the L/C Documents relating to such Letter of Credit and (ii) a participation in a percentage equal to such Lender's R/C Percentage in any interest or other amounts payable by Borrower hereunder and under such L/C Documents in respect of such Reimbursement Obligation. Upon receipt by L/C Lender from or for the account of Borrower of any payment in respect of any Reimbursement Obligation or any such interest or other amounts (including by way of setoff or application of proceeds of any collateral security) L/C Lender shall promptly pay to Administrative Agent for the account of each Revolving Lender which has satisfied its obligations under clause (e) above, such Revolving Lender's R/C Percentage of such payment, each such payment by L/C Lender to be made in Dollars. In the event any payment received by L/C Lender and so paid to the Revolving Lenders hereunder is rescinded or must otherwise be returned by L/C Lender, each Revolving Lender shall, upon the request of L/C Lender (through Administrative Agent), repay to L/C Lender (through Administrative Agent) the amount of such payment paid to such Lender, with interest at the rate specified in clause (i) of this Section 2.03. (g) Borrower shall pay to Administrative Agent for the account of L/C Lender in respect of each Letter of Credit a letter of credit commission in an amount (not less than $500) equal to (x) the rate PER ANNUM equal to the Applicable Margin for Revolving Loans that are LIBOR Loans in effect from time to time, multiplied by (y) the daily average undrawn face amount of such Letter of Credit for the period from and including the date of issuance of such Letter of Credit (i) in the case of a Letter of Credit which expires in accordance with its terms, to and including such expiration date and (ii) in the case of a Letter of Credit which is drawn in full or is otherwise terminated other than on the stated expiration date of such Letter of Credit, to but excluding the date such Letter of Credit is drawn in full or is terminated, such fee to be non-refundable and to be paid in arrears quarterly, on each Quarterly Date, and on the earlier of the R/C Termination Date or the date of the termination of the Revolving Commitment or the date of such termination, expiration or the Business Day subsequent to notice of a drawing. L/C Lender shall pay to Administrative Agent for the account of each Revolving Lender (other than L/C Lender), from time to time at reasonable intervals (but in any event at least quarterly), but only to the extent actually received from Borrower, an amount equal to such Lender's R/C Percentage of all letter of credit commissions referred to in the first sentence of this clause (g). In addition, Borrower shall pay to Administrative Agent for account of L/C Lender only in respect of each Letter of Credit a letter of credit issuance fee in an amount equal to 0.25% PER ANNUM multiplied by the original face amount from the issue date through the expiry date of such Letter of Credit (but in no event less than $500 per Letter of Credit), such amount to be payable on the date of issuance of such Letter of Credit, plus all charges, costs and expenses in the amounts customarily charged by L/C Lender from time to time in like circumstances with respect to the issuance, amendment or transfer of each Letter of Credit and drawings and other transactions relating thereto. (h) Upon the issuance of a standby Letter of Credit, L/C Lender shall deliver (through Administrative Agent) to each Revolving Lender a notice describing such standby Letter of Credit, and promptly following the end of each week, L/C Lender shall deliver (through Administrative Agent) to each Revolving Lender and Borrower a notice describing the aggregate amount of all Letters of Credit outstanding at the end of such week. Upon the -43- request of any Revolving Lender from time to time, L/C Lender shall deliver any other information reasonably requested by such Lender with respect to each Letter of Credit then outstanding. (i) To the extent that any Revolving Lender fails to pay an amount required to be paid pursuant to clause (e) or (f) of this Section 2.03 on the due date therefor, such Lender shall pay interest to L/C Lender (through Administrative Agent) on such amount from and including such due date to but excluding the date such payment is made at a rate PER ANNUM equal to the Federal Funds Rate (as in effect from time to time). (j) The issuance by L/C Lender of any modification or supplement to any Letter of Credit hereunder that would extend the expiry date or increase the face amount thereof shall be subject to the same conditions applicable under this Section 2.03 to the issuance of new Letters of Credit, and no such modification or supplement shall be issued hereunder unless either (x) the respective Letter of Credit affected thereby would have complied with such conditions had it originally been issued hereunder in such modified or supplemented form or (y) the Majority Revolving Lenders (or all of the Revolving Lenders to the extent required by Section 12.04) shall have consented thereto. (k) Notwithstanding the foregoing, L/C Lender shall not be under any obligation to issue any Letter of Credit if at the time of such issuance, any order, judgment or decree of any Governmental Authority or arbitrator shall purport by its terms to enjoin or restrain L/C Lender from issuing such Letter of Credit or any requirement of law applicable to L/C Lender or any request or directive (whether or not having the force of law) from any Governmental Authority shall prohibit the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such L/C Lender with respect to such Letter of Credit any restriction or reserve or capital requirement (for which L/C Lender is not otherwise compensated) not in effect on the date hereof. At any time that L/C Lender shall not be under any obligation to issue Letters of Credit pursuant to this paragraph (k), L/C Lender may be replaced by Borrower with another Lender reasonably acceptable to Administrative Agent and Borrower upon notice to L/C Lender and Administrative Agent and acceptance of such appointment by such successor L/C Lender. Upon any such replacement, Administrative Agent shall notify the Lenders of any such replacement of L/C Lender and the replacement L/C Lender shall agree to be bound by the applicable provisions of this Agreement. At the time any such replacement shall become effective, Borrower shall pay all unpaid fees accrued for the account of the replaced L/C Lender pursuant to Section 2.03(g). From and after the effective date of any such replacement, (i) the successor L/C Lender shall have all the rights and obligations of L/C Lender under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term "L/C Lender" shall be deemed to refer to such successor or to any previous L/C Lender, or to such successor and all previous L/C Lenders, as the context shall require. After the replacement of an L/C Lender hereunder, the replaced L/C Lender shall remain a party hereto and shall continue to have all the rights and obligations of an L/C Lender under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit. -44- The obligations of Borrower under this Agreement and any L/C Document to reimburse L/C Lender for a drawing under a Letter of Credit, and to repay any drawing under a Letter of Credit converted into Revolving Loans, shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement and each such other L/C Document under all circumstances, including the following: (i) any lack of validity or enforceability of this Agreement or any L/C Document; (ii) the existence of any claim, set-off, defense or other right that Borrower may have at any time against any beneficiary or any transferee of any Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), L/C Lender or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by the L/C Documents or any unrelated transaction; (iii) any draft, demand, certificate or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit; or any defense based upon the failure of any drawing under a Letter of Credit to conform to the terms of the Letter of Credit or any non-application or misapplication by the beneficiary of the proceeds of such drawing; or (iv) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, Borrower or a Guarantor; PROVIDED, HOWEVER, that neither Borrower nor any Revolving Lender shall be obligated to reimburse L/C Lender for any wrongful payment finally determined by a court of competent jurisdiction to have been made by L/C Lender as a result of acts or omissions constituting bad faith, willful misconduct or gross negligence on the part of L/C Lender. To the extent that any provision of any L/C Document is inconsistent with the provisions of this Section 2.03, the provisions of this Section 2.03 shall control. 2.04. TERMINATION AND REDUCTIONS OF COMMITMENTS. (a)(i) The aggregate amount of the Revolving Commitments shall be automatically and permanently reduced to zero on the R/C Termination Date. (ii) The aggregate amount of the Revolving Commitment shall be permanently reduced on the date any required prepayments described in Section 2.10(a) and 2.11 are required to be made in the amount specified in Section 2.10(b)(ii) and 2.11. (iii) The aggregate amount of the Term A-1 Facility Commitments shall be automatically and permanently reduced to zero on the earlier of (A) the Term A-1 Facility Termination Date and (B) immediately after the making of the Term A-1 Facility Loans. (iv) The aggregate amount of the Term A-2 Facility Commitments shall be automatically and permanently reduced by $5.0 million immediately after the making of the Term A-2 Facility Loans in such amount on the Closing Date. The aggregate amount of the Term A-2 Facility Commitments shall be automatically and permanently reduced to zero on the earlier of (A) the Term A-2 Facility Termination Date and (B) immediately after the making of the remaining Term A-2 Facility Loans after the Closing Date. -45- (v) The aggregate amount of the Term B Facility Commitments shall be automatically and permanently reduced to zero immediately after the making of all of the Term B Facility Loans on the Closing Date. (vi) The aggregate amount of the Term C Facility Commitments shall be automatically and permanently reduced to zero on the earlier of (A) the Term C Facility Termination Date and (B) immediately after the making of all of the Term C Facility Loans. (b) Borrower shall have the right at any time or from time to time (without premium or penalty except breakage costs (if any) pursuant to Section 5.05)) (i) so long as no Revolving Loans or L/C Liabilities will be outstanding as of the date specified for termination, to terminate the Revolving Commitments in their entirety, and (ii) to reduce the aggregate amount of the Unutilized R/C Commitments (which shall be PRO RATA among Revolving Lenders); PROVIDED, HOWEVER, that (x) Borrower shall give notice of each such termination or reduction as provided in Section 4.05, and (y) each partial reduction shall be in an aggregate amount at least equal to $1 million (or a larger multiple of $1 million) or, if less, the remaining Unutilized R/C Commitments. (c) Any Commitment once terminated or reduced may not be reinstated. 2.05. FEES. (a) Borrower shall pay to Administrative Agent for the account of each Revolving Lender a commitment fee on the daily average amount of such Lender's Unutilized R/C Commitment, for the period from and including the Closing Date to but not including the earlier of the date such Revolving Commitment is terminated and the R/C Termination Date, at a rate equal to 0.50% PER ANNUM. Any accrued commitment fee under this Section 2.05(a) shall be payable in arrears on each Quarterly Date and on the earlier of the date the Revolving Commitments are terminated or expire and the R/C Termination Date. (b) Borrower shall pay to Administrative Agent for the account of each Term Loan Lender a commitment fee on the daily average amount of such Lender's Term Loan Commitment, for the period from and including the Closing Date to but not including the date such Term Loan Commitment is terminated, at a rate equal to 0.75% PER ANNUM. Any accrued commitment fee under this Section 2.05(b) shall be payable in arrears on each Quarterly Date and on the date the Term Loan Commitments are terminated. (c) Borrower shall pay to Administrative Agent for its own account the annual administrative fee pursuant to the Administrative Agent's Fee Letter. 2.06. LENDING OFFICES. The Loans of each Type made by each Lender shall be made and maintained at such Lender's Applicable Lending Office for Loans of such Type. 2.07. SEVERAL OBLIGATIONS OF LENDERS. The failure of any Lender to make any Loan to be made by it on the date specified therefor shall not relieve any other Lender of its obligation to make its Loan on such date, but neither any Lender nor Administrative Agent shall be responsible for the failure of any other Lender to make a Loan to be made by such other Lender, and no Lender shall have any obligation to Administrative Agent or any other Lender for the failure by such Lender to -46- make any Loan required to be made by such Lender. No Revolving Lender will be responsible for failure of any other Lender to fund its participation in Letters of Credit. 2.08. NOTES; REGISTER. (a) At the request of any Lender, its Loans of a particular Class shall be evidenced by a promissory note, dated the Closing Date, payable to such Lender (or its nominee) and otherwise duly completed, substantially in the form of EXHIBITS A-1, A-2, A-3 and A-4, for such Lender's Revolving Loans, Term A Facility Loans, Term B Facility Loans and Term C Facility Loans, respectively. (b) The date, amount, Type, interest rate and duration of the Interest Period (if applicable) of each Loan of each Class made by each Lender to Borrower and each payment made on account of the principal thereof, shall be recorded by such Lender (or its nominee) on its books and, prior to any transfer of any Note evidencing the Loans of such Class held by it, endorsed by such Lender (or its nominee) on the schedule attached to such Note or any continuation thereof; PROVIDED, HOWEVER, that the failure of such Lender (or its nominee) to make any such recordation or endorsement or any error in such recordation or endorsement shall not affect the obligations of Borrower to make a payment when due of any amount owing hereunder or under such Note. (c) Borrower hereby designates Administrative Agent to serve as its agent, solely for purposes of this Section 2.08, to maintain a register (the "REGISTER") on which it will record the name and address of each Lender, the Commitment from time to time of each of the Lenders, the principal amount of the Loans made by each of the Lenders and each repayment in respect of the principal amount of the Loans of each Lender. Failure to make any such recordation or any error in such recordation shall not affect Borrower's obligations in respect of such Loans. The entries in the Register shall be conclusive, in the absence of manifest error, and the parties hereto shall treat each Person whose name is recorded in the Register as the owner of a Loan or other obligation hereunder as the owner thereof for all purposes of the Credit Documents, notwithstanding any notice to the contrary. The Register shall be available for inspection by Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. 2.09. OPTIONAL PREPAYMENTS AND CONVERSIONS OR CONTINUATIONS OF LOANS. Subject to Section 4.04, Borrower shall have the right to prepay Loans, or to Convert Loans of one Type into Loans of another Type or to Continue Loans of one Type as Loans of the same Type, at any time or from time to time. Borrower shall give Administrative Agent notice of each such prepayment, Conversion or Continuation as provided in Section 4.05 (and, upon the date specified in any such notice of prepayment, the amount to be prepaid shall become due and payable hereunder). Each notice of Conversion or Continuation shall be substantially in the form of EXHIBIT H. If LIBOR Loans are prepaid or Converted other than on the last day of an Interest Period therefor, Borrower shall at such time pay all expenses and costs required by Section 5.05. Notwithstanding the foregoing, and without limiting the rights and remedies of the Lenders under Section 10, in the event that any Event of Default shall have occurred and be continuing, Administrative Agent may (and at the request of the Majority Lenders shall) suspend the right of Borrower while an Event of Default is continuing to Convert any Loan into a LIBOR Loan, or to Continue any Loan as a LIBOR Loan, in which event all Loans shall be Converted (on the last day(s) of the respective Interest Periods therefor) or Continued, as the case may be, as ABR Loans. Prepayments of the Term Loans pursuant to this Section 2.09 shall be applied PRO RATA among the Term Facilities based upon the remaining unpaid amounts thereof, and as to each Term -47- Facility, PRO RATA among the remaining Amortization Payments thereof based upon the remaining unpaid amounts thereof. Notwithstanding the foregoing, any holder of Term B Facility Loans or Term C Facility Loans at its sole discretion may, with respect to any optional prepayment, so long as any Term A Facility Loans are then outstanding (after giving effect to the application of such required prepayment to the Term A Facility Term Loans), elect by written notice provided to Administrative Agent not to have all or any amount of any such required prepayments applied to such holder's Term B Facility Loans or Term C Facility Loans, as the case may be, in which case the aggregate amount so declined shall be applied to the Term A Facility Loans PRO RATA to the remaining Amortization Payments thereof; PROVIDED, HOWEVER, that to the extent that the aggregate principal amount of the Term A Facility Loans after giving effect to such optional prepayment is less than the aggregate amount so declined by the holders of the Term B Facility Loans and Term C Facility Loans, the excess of such amount so declined and not applied to the Term A Facility Loans shall be allocated between the declining holders of the Term B Facility Loans and Term C Facility Loans PRO RATA based on the aggregate amount declined by each such holder, and as to each Term Facility, PRO RATA among the remaining Amortization Payments thereof based upon the remaining unpaid amounts thereof. 2.10. MANDATORY PREPAYMENT AND COMMITMENT REDUCTIONS. (a) Borrower shall prepay the Loans (and/or reduce Commitments) as follows (each such prepayment (and/or Commitment reduction) to be effected in each case in the manner, order and to the extent specified in subsection (b) below of this Section 2.10): (i) CASUALTY EVENTS. Within one Business Day after Holdings or any Company receives any Net Available Proceeds from any Casualty Event, in an aggregate principal amount equal to 100% of such Net Available Proceeds; PROVIDED, HOWEVER, that (w) if no Default or Event of Default then exists or would arise therefrom, the Net Available Proceeds thereof shall not be required to be so applied on such date to the extent that Borrower has delivered an Officers' Certificate to Administrative Agent on or prior to such date stating that such proceeds shall be used to fund the purchase of Property used or usable in the business of the Companies or repair, replace or restore the Property in respect of which such Casualty Event has occurred, in each case within 270 days following the date of the receipt of such Net Available Proceeds, (x) all such Net Available Proceeds in excess of $100,000 in the aggregate for all such Casualty Events shall be held in the Collateral Account and released therefrom only in accordance with the terms of the Security Agreement, and (y) if all or any portion of such Net Available Proceeds not required to be applied to the prepayment of Loans pursuant to the preceding proviso (w) is not so used within 270 days after the date of the receipt of such Net Available Proceeds, such remaining portion shall be applied on the last day of such period as specified in Section 2.10(b). -48- (ii) EQUITY ISSUANCE. Upon any Equity Issuance, in an aggregate principal amount equal to 50% of the Net Available Proceeds of such Equity Issuance. (iii) DEBT ISSUANCE. Upon any Debt Issuance (other than a Qualified Debt Issuance), in an aggregate principal amount equal to 100% of the Net Available Proceeds of such Debt Issuance. (iv) DISPOSITION EVENTS. Within one Business Day after receipt by Holdings or any Company of any Net Available Proceeds from any Disposition Event under Section 9.06(g), in an aggregate principal amount equal to 100% of the Net Available Proceeds from such Disposition Event (it being understood that applications pursuant to this Section 2.10(a)(iv) shall not be duplicative of Section 2.10(a)(iii) above); PROVIDED, HOWEVER, that (x) the Net Available Proceeds from any Disposition Event permitted by Section 9.06(g) shall not be required to be applied as provided herein on such date if (1) no Default or Event of Default then exists or would arise therefrom, and (2) Borrower delivers an Officers' Certificate to Administrative Agent on or prior to such date stating that such Net Available Proceeds shall be reinvested in capital assets of (A) if such Disposition Event was effected by any Obligor, an Obligor and (B) if such Disposition Event was effected by any other Company, any Company, in each case within one year following the date of such Disposition Event (which certificate shall set forth the estimates of the proceeds to be so expended), (y) all such Net Available Proceeds in excess of $250,000 in the aggregate for all such Disposition Events shall be held in the Collateral Account and released therefrom only in accordance with the terms of the Security Agreement, (z) if all or any portion of such Net Available Proceeds which are permitted to be applied to reinvestment pursuant to the terms of this Section 2.10(a)(iv) is not so used within such one year period, such remaining portion shall be applied on the last day of such period (or such earlier date as Borrower determines not to reinvest any portion thereof) as specified in Section 2.10(b) (it being understood that the foregoing shall in no way affect the obligation of any Company to obtain the consent of the Majority Lenders if required pursuant to this Agreement to effect any Disposition). (v) EXCESS CASH FLOW. Not later than 90 days after the end of each fiscal year of Borrower commencing with the fiscal year ended December 31, 2000, in an aggregate principal amount equal to (A) 75% of Excess Cash Flow for such fiscal year when the Total Leverage Ratio at the end of such fiscal year is greater than 4.50:1.0 (as evidenced by an Officer's Certificate delivered to Administrative Agent) or (B) 50% of Excess Cash Flow for such fiscal year when the Total Leverage Ratio at the end of such fiscal year is less than or equal to 4.50:1.0 (as evidenced by an Officer's Certificate delivered to Administrative Agent). (vi) PURCHASE PRICE ADJUSTMENT. Upon any material adjustment to the purchase price for the Allentown Acquisition or the Aurora Acquisition received in cash by Holdings or any Company pursuant to the Allentown Acquisition Agreement or the Aurora Acquisition -49- Agreement (other than for any loss, cost or expense incurred by Holdings or any Company and net liabilities assumed by Holdings or any Company thereunder) (the "PURCHASE PRICE ADJUSTMENT AMOUNT"), in an aggregate principal amount equal to 100% of the Purchase Price Adjustment Amount. (vii) PENSION PLAN REFUND. On the date on which Holdings or any Company receives any cash payments (net of any reasonable costs associated therewith, including income, excise and other taxes payable thereon) from any return of surplus assets from any single Pension Plan or Foreign Plan in an amount equal to 100% of such net amount. (viii) OTHER REQUIRED PREPAYMENTS. If the terms of any agreement, instrument or indenture pursuant to which any Indebtedness (other than the Obligations) PARI PASSU with or junior in right of payment to the Loans is outstanding (or pursuant to which such Indebtedness is guaranteed) require prepayment of such Indebtedness out of the Net Available Proceeds of any Disposition unless such Net Available Proceeds are used to prepay other Indebtedness or reinvested in the business of the Companies, then, to the extent not otherwise required by this Section 2.10(a), if the Companies shall not have reinvested the Net Available Proceeds thereof as permitted by Section 2.10(a) within the time frame permitted thereby (but prior to the date required to be applied to such Indebtedness), the Loans shall be repaid in an amount not less than the minimum amount that would be required to be prepaid not later than the latest time as and upon such terms so that such other Indebtedness will not be required to be prepaid pursuant to the terms of the agreement, indenture or instrument or guarantee governing such other Indebtedness. (b) APPLICATION. The amount of any required prepayments described in Section 2.10(a) shall be applied to prepay Loans and/or reduce Commitments as follows: (i) FIRST, the amount of the required prepayment shall be applied to the reduction of Amortization Payments on the Term Loans required by Section 3.01(b) PRO RATA among the Term Facilities based upon the remaining unpaid amounts thereof, with any application (A) to the Term A Facility to be applied PRO RATA to the remaining Amortization Payments thereof based on the remaining unpaid amounts thereof and (B) to each of the other Term Facilities to be applied (I) PRO RATA to the remaining Amortization Payments thereof based on the remaining unpaid amounts thereof (with respect to mandatory prepayments pursuant to Sections 2.10(a)(ii), (iii), (iv) (solely in connection with Sale and Leaseback Transactions) or (v) and (II) in inverse order of maturity to the remaining Amortization Payments thereof (with respect to mandatory prepayments pursuant to Sections 2.10(a)(i), (iv) (except in connection with Sale and Leaseback Transactions), (vi), (vii) or (viii)). Notwithstanding the foregoing, any holder of Term B Facility Loans or Term C Facility Loans may, at its sole discretion, so long as any Term A Facility Loans are then outstanding (after giving effect to the application of such required prepayment to the Term A Facility Loans), elect by written notice provided to Administrative Agent not to have all or any amount of any such required prepayments applied to such holder's Term B Facility Loans or Term C Facility Loans, as the case may be, in which case the aggregate amount so declined shall be applied to the Term A Facility Loans PRO RATA to the remaining Amortization Payments thereof; PROVIDED, HOWEVER, that to the extent that the aggregate principal amount of the Term A Facility Loans after giving effect to such -50- mandatory prepayment is less than the aggregate amount so declined by the holders of the Term B Facility Loans and Term C Facility Loans, the excess shall be allocated between the declining holders of the Term B Facility Loans and Term C Facility Loans PRO RATA based on the aggregate amount declined by each such holder, and as to each Term Facility, on the basis specified in clause (B) of the preceding sentence. (ii) SECOND, after such time as no Term Loans remain outstanding, the Revolving Commitments shall be permanently reduced PRO RATA in an amount equal to the remaining amount of any such required prepayment that would have been applied to the Term Loans (at the same time that the prepayment of the Term Loans would have been made and assuming an unlimited amount thereof then outstanding) and to the extent that, after giving effect to such reduction, the aggregate principal amount of Revolving Loans PLUS the aggregate amount of all L/C Liabilities would exceed the Revolving Commitments, Borrower shall, FIRST, prepay outstanding Revolving Loans and, SECOND, provide cover for L/C Liabilities as specified in Section 2.10(d), in an aggregate amount equal to such excess. (iii) THIRD, after application of prepayments in accordance with clauses (i) and (ii) above, Borrower shall be permitted to retain any such remaining excess. Notwithstanding the foregoing, if the amount of any prepayment of Loans required under this Section 2.10 shall be in excess of the amount of the ABR Loans at the time outstanding, only the portion of the amount of such prepayment as is equal to the amount of such outstanding ABR Loans shall be immediately prepaid and, at the election of Borrower, the balance of such required prepayment shall at Borrower's option be either (i) deposited in the Collateral Account and applied to the prepayment of LIBOR Loans on the last day of the then next-expiring Interest Period for LIBOR Loans (with all interest accruing thereon for the account of Borrower) or (ii) prepaid immediately, together with any amounts owing to the Lenders under Section 5.05. Notwithstanding any such deposit in the Collateral Account, interest shall continue to accrue on such Loans until prepayment. (c) REVOLVING CREDIT EXTENSION REDUCTIONS. Until the R/C Termination Date, Borrower shall from time to time immediately prepay the Revolving Loans (and/or provide cover for L/C Liabilities as specified in Section 2.10(d)) in such amounts as shall be necessary so that at all times the aggregate outstanding amount of the Revolving Loans PLUS the aggregate outstanding L/C Liabilities shall not exceed the Revolving Commitments as in effect at such time, such amount to be applied, FIRST, to Revolving Loans outstanding and, SECOND, as cover for L/C Liabilities outstanding as specified in Section 2.10(d). (d) COVER FOR L/C LIABILITIES. In the event that Borrower shall be required pursuant to this Section 2.10 to provide cover for L/C Liabilities, Borrower shall effect the same by paying to Administrative Agent immediately available funds in an amount equal to the required amount, which funds shall be retained by Administrative Agent in the Collateral Account (as provided in the Security Agreement as collateral security in the first instance for the L/C Liabilities) until such time as all Letters of Credit shall have been terminated and all of the L/C Liabilities paid in full. 2.11. MANDATORY OFFER TO PURCHASE. (a) Prior to any Qualified Debt Issuance, Borrower shall make an offer to prepay (the "OFFER") the Loans (and/or reduce Commitments) in an ag- -51- gregate principal amount equal to 100% of the Net Available Proceeds of such Qualified Debt Issuance. Borrower shall notify each Lender not less than 20 Business Days prior to such Qualified Debt Issuance and shall specify an expiration date (the "EXPIRATION DATE") of such Offer, which shall be a date that is not more than 5 Business Days prior to such Qualified Debt Issuance. The Lenders shall notify Borrower and the Administrative Agent prior to the Expiration Date of their election of whether or not to be prepaid. (b) APPLICATION. Each Lender electing to be prepaid (the "ELECTING Lenders") shall be prepaid (and have their Commitments reduced) from the Net Available Proceeds of such Qualified Debt Issuance in an amount equal to such Net Available Proceeds multiplied by the ratio of such Electing Lender's Loans and Commitments to the aggregate amount of Loans and Commitments of all Electing Lenders, with any application to each Term Facility to be applied PRO RATA to the remaining Amortization Payments thereof based on the remaining unpaid amounts thereof. After application of prepayments in accordance with this Section 2.11, Borrower shall be permitted to retain any such remaining excess ("EXCESS QUALIFIED DEBT ISSUANCE PROCEEDS") or apply such amounts as provided in Section 9.10(d). Notwithstanding the foregoing, if the amount of any prepayment of Loans required under this Section 2.11 shall be in excess of the amount of the ABR Loans at the time outstanding, only the portion of the amount of such prepayment as is equal to the amount of such outstanding ABR Loans of Lenders electing to be prepaid shall be immediately prepaid and, at the election of Borrower, the balance of such required prepayment shall at Borrower's option be either (i) deposited in the Collateral Account and applied to the prepayment of LIBOR Loans on the last day of the then next-expiring Interest Period for LIBOR Loans (with all interest accruing thereon for the account of Borrower) or (ii) prepaid immediately, together with any amounts owing to the Lenders under Section 5.05. Notwithstanding any such deposit in the Collateral Account, interest shall continue to accrue on such Loans until prepayment. 2.12. REPLACEMENT OF LENDERS. Borrower shall have the right, if no Default then exists, to replace any Lender (the "REPLACED LENDER") with one or more other Eligible Persons reasonably acceptable to Lead Arranger (collectively, the "REPLACEMENT LENDER") if (x) such Lender is charging Borrower increased costs pursuant to Section 5.01 or 5.06 in excess of those being charged generally by the other Lenders or such Lender becomes incapable of making LIBOR Loans as provided in Section 5.03 when other Lenders are generally able to do so and/or (y) as provided in Section 12.04(ii), such Lender refuses to consent to certain proposed amendments, waivers or modifications with respect to this Agreement; PROVIDED, HOWEVER, that (i) at the time of any replacement pursuant to this Section 2.12, the Replacement Lender shall enter into one or more assignment agreements (and with all fees payable pursuant to Section 12.06 to be paid by the Replacement Lender) pursuant to which the Replacement Lender shall acquire all of the Commitments and outstanding Loans of, and in each case L/C Interests by, the Replaced Lender and, in connection therewith, shall pay to (x) the Replaced Lender, an amount equal to the sum of (A) the principal of, and all accrued interest on, all outstanding Loans of the Replaced Lender, (B) all Reimbursement Obligations owing to such Replaced Lender, together with all then unpaid interest with respect thereto at such time, and (C) all accrued, but theretofore unpaid, fees owing to the Replaced Lender pursuant to Section 2.05, and (y) L/C Lender an amount equal to such Replaced Lender's R/C Percentage of any Reimbursement Obligations (which at such time remains a Reimbursement Obligation) to the extent such amount was not -52- theretofore funded by such Replaced Lender, and (ii) all obligations of Borrower owing to the Replaced Lender (other than those specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being, paid, but including any amounts which would be paid to a Lender pursuant to Section 5.05 if Borrower were prepaying a LIBOR Loan) shall be paid in full to such Replaced Lender concurrently with such replacement. Upon the execution of the respective assignment agreement, the payment of amounts referred to in clauses (i) and (ii) above and, if so requested by the Replacement Lender, delivery to the Replacement Lender of Notes executed by Borrower, the Replacement Lender shall become a Lender hereunder and the Replaced Lender shall cease to constitute a Lender hereunder and be released of all its obligations as a Lender, except with respect to indemnification provisions applicable to the Replaced Lender under this Agreement, which shall survive as to such Replaced Lender. Section 3. PAYMENTS OF PRINCIPAL AND INTEREST. 3.01. REPAYMENT OF LOANS. (a) REVOLVING CREDIT. Borrower hereby promises to pay to Administrative Agent for the account of each Revolving Lender the entire outstanding principal amount of such Revolving Lender's Revolving Loans made to Borrower and each Revolving Loan shall mature, on the R/C Termination Date. (b) TERM A FACILITY LOANS, TERM B FACILITY LOANS, AND TERM C FACILITY Loans. Borrower hereby promises to pay to Administrative Agent for the account of the Term Lenders in repayment of the principal of the Term Loans specified in SCHEDULE 3.01(b), the amount of the respective Term Loan specified in SCHEDULE 3.01(B) under the column entitled "Term A-1 Facility Loans," "Term A-2 Facility Loans," "Term B Facility Loans" and "Term C Facility Loans," respectively on the dates set forth on SCHEDULE 3.01(B) (subject to adjustment for any prepayments made under Sections 2.09, 2.10 and 2.11 to the extent actually made). 3.02. INTEREST. (a) Borrower hereby promises to pay to Administrative Agent for the account of each Lender interest on the unpaid principal amount of each Loan made or maintained by such Lender to Borrower for the period from and including the date of such Loan to but excluding the date such Loan shall be paid in full at the following rates PER ANNUM: (i) during such periods as such Loan is an ABR Loan, the Alternate Base Rate (as in effect from time to time), PLUS the Applicable Margin, and (ii) during such periods as such Loan is a LIBOR Loan, for each Interest Period relating thereto, the LIBO Rate for such Loan for such Interest Period, plus the Applicable Margin. (b) Upon the occurrence and during the existence of a Default, (i) the unpaid principal amount of each Loan shall bear interest at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Loan pursuant to subsections (a)(i) and (a)(ii) above, and (ii) all Obligations other than Loans shall bear interest at the rate which is 2% in excess of -53- the rate otherwise applicable to ABR Loans which are Revolving Loans from time to time. Interest which accrues under this paragraph shall be payable on demand. (c) Accrued interest on each Loan shall be payable (i) in the case of an ABR Loan, quarterly on the Quarterly Dates, (ii) in the case of a LIBOR Loan, on the last day of each Interest Period therefor and, if such Interest Period is longer than three months, at three-month intervals following the first day of such Interest Period and (iii) in the case of any LIBOR Loan, upon the payment or prepayment thereof or the Conversion of such Loan to a Loan of another Type (but only on the principal amount so paid, prepaid or Converted), except that interest payable at the rate set forth in Section 3.02(b) shall be payable from time to time on demand. Promptly after the determination of any interest rate provided for herein or any change therein, Administrative Agent shall give notice thereof to the Lenders to which such interest is payable and to Borrower. Section 4. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC. 4.01. PAYMENTS. (a) All payments of principal, interest, Reimbursement Obligations and other amounts to be made by Borrower under this Agreement and the Notes, and, except to the extent otherwise provided therein, all payments to be made by the Obligors under any other Credit Document, shall be made in Dollars, in immediately available funds, without deduction, set-off or counterclaim, to Administrative Agent at its account at the Principal Office, not later than 11:00 a.m. New York City time on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). (b) Borrower shall, at the time of making each payment under this Agreement or any Note for the account of any Lender, specify (in accordance with Section 2.09 and 2.10, if applicable) to Administrative Agent (which shall so notify the intended recipient(s) thereof) the Class and Type of Loans, Reimbursement Obligations or other amounts payable by Borrower hereunder to which such payment is to be applied (and in the event that Borrower fails to so specify, or if an Event of Default has occurred and is continuing, Administrative Agent may distribute such payment to the Lenders for application to the Obligations under the Credit Documents in such manner as it or the Majority Lenders, subject to Sections 2.09, 2.10, 2.11 and 4.02, may determine to be appropriate). (c) Except to the extent otherwise provided in the second sentence of Section 2.03(g), each payment received by Administrative Agent or by L/C Lender (through Administrative Agent) under this Agreement or any Note for the account of any Lender shall be paid by Administrative Agent or by L/C Lender (through Administrative Agent), as the case may be, to such Lender, in immediately available funds, (x) if the payment was actually received by Administrative Agent or by L/C Lender (through Administrative Agent), as the case may be, prior to 11:00 a.m. (New York City time) on any day, on such day and (y) if the payment was actually received by Administrative Agent or by L/C Lender (through Administrative Agent), as the case may be, after 11:00 a.m. (New York City time) on any day, by 1:00 p.m. (New York City time) on the following Business Day (it being understood that to the extent that any such payment is not made in full by Administrative Agent or by L/C Lender (through Administrative Agent), as the case may be, Administrative Agent shall pay to such Lender, upon demand, interest at the Federal Funds Rate from the date such amount was required to -54- be paid to such Lender pursuant to the foregoing clauses until the date Administrative Agent pays such Lender the full amount). (d) If the due date of any payment under this Agreement or any Note would otherwise fall on a day that is not a Business Day, such date shall be extended to the next succeeding Business Day, and interest shall be payable for any principal so extended for the period of such extension at the rate then borne by such principal. 4.02. PRO RATA TREATMENT. Except to the extent otherwise provided herein: (a) each borrowing of Loans of a particular Class from the Lenders under Section 2.01 shall be made from the relevant Lenders, each payment of commitment fees under Section 2.05 in respect of Commitments of a particular Class shall be made for account of the relevant Lenders, and each termination or reduction of the amount of the Commitments of a particular Class under Section 2.04 shall be applied to the respective Commitments of such Class of the relevant Lenders, PRO RATA according to the amounts of their respective Commitments of such Class; (b) except as otherwise provided in Section 5.04, LIBOR Loans of any Class having the same Interest Period shall be allocated PRO RATA among the relevant Lenders according to the amounts of their respective Revolving Commitments and Term Loan Commitments (in the case of the making of Loans) or their respective Revolving Loans and Term Loans (in the case of Conversions and Continuations of Loans); (c) each payment or prepayment of principal of Revolving Loans or of any particular Class of Term Loans shall be made for the account of the relevant Lenders PRO RATA in accordance with the respective unpaid outstanding principal amounts of the Loans of such Class held by them; and (d) each payment of interest on Revolving Loans and Term Loans shall be made for account of the relevant Lenders PRO RATA in accordance with the amounts of interest on such Loans then due and payable to the respective Lenders. 4.03. COMPUTATIONS. Interest on LIBOR Loans, commitment fees and Letter of Credit fees shall be computed on the basis of a year of 360 days and actual days elapsed (including the first day but excluding the last day) occurring in the period for which such amounts are payable and interest on ABR Loans and Reimbursement Obligations shall be computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed (including the first day but excluding the last day) occurring in the period for which such amounts are payable. Notwithstanding the foregoing, for each day that the Alternate Base Rate is calculated by reference to the Federal Funds Rate, interest on ABR Loans and Reimbursement Obligations shall be computed on the basis of a year of 360 days and actual days elapsed (including the first day but excluding the last day). 4.04. MINIMUM AMOUNTS. Except for mandatory prepayments made pursuant to Sections 2.10 and 2.11 and Conversions or prepayments made pursuant to Section 5.04, each borrowing, Conversion and prepayment of principal of Loans shall be in an amount at least equal to $1.0 million with respect to ABR Loans and $1.0 million with respect to LIBOR Loans and in multiples of $100,000 in excess thereof (borrowings, Conversions or prepayments of or into Loans of different Types or, in the case of LIBOR Loans, having different Interest Periods at the same time hereunder to be deemed separate borrowings, Conversions and prepayments for purposes of the foregoing, one for each Type or Interest Period). Anything in this Agreement to the contrary notwithstanding, the aggregate principal amount of LIBOR Loans having the same Interest Period shall be in an amount at least equal to $1.0 million and in multiples of $100,000 in excess thereof and, if any -55- LIBOR Loans or portions thereof would otherwise be in a lesser principal amount for any period, such Loans or portions, as the case may be, shall be ABR Loans during such period. 4.05. CERTAIN NOTICES. Notices by Borrower to Administrative Agent of terminations or reductions of the Commitments, of borrowings, Conversions, Continuations and optional prepayments of Loans and of Classes of Loans, of Types of Loans and of the duration of Interest Periods shall be irrevocable and shall be effective only if received by Administrative Agent by telephone not later than 11:00 a.m. New York City time (promptly followed by written notice via telecopier) on the number of Business Days prior to the date of the relevant termination, reduction, borrowing, Conversion, Continuation or prepayment or the first day of such Interest Period specified in the table below. NOTICE PERIODS Notice Number of Business Days Prior - ------ ----------------------------- Termination or reduction of Commitments 2 Borrowing or optional prepayment of, or Conversions into, ABR Loans 1 Borrowing or optional prepayment of, Conversions into, Continuations as, or duration of Interest Periods for, LIBOR Loans 3 Each such notice of termination or reduction shall specify the amount and the Class of the Commitments to be terminated or reduced. Each such notice of borrowing, Conversion, Continuation or prepayment shall specify the Class of Loans to be borrowed, Converted, Continued or prepaid and the amount (subject to Section 4.04) and Type of each Loan to be borrowed, Converted, Continued or prepaid and the date of borrowing, Conversion, Continuation or prepayment (which shall be a Business Day). Each such notice of the duration of an Interest Period shall specify the Loans to which such Interest Period is to relate. Unless otherwise consented to by Lead Arranger in its sole discretion, prior to the earlier of (x) five days after the Closing Date, and (y) the date on which Borrower has been notified by Lead Arranger that the primary syndication of the Commitments has been completed, no borrowing of or Conversion into any LIBOR Loan may be made, and, in addition to the foregoing limitation, prior to the earlier of (x) thirty days after the Closing Date and (y) the date on which Borrower has been notified by Lead Arranger that the primary syndication of the Commitments has been completed, no Interest Period of more than one month may be elected. Administrative Agent shall promptly notify the Lenders of the contents of each such notice. In the event that Borrower fails to select the Type of Loan, or the duration of any Interest Period for any LIBOR Loan, within the time period and otherwise as provided in this Section 4.05, such Loan (if outstanding as a LIBOR Loan) will be automatically Converted into an ABR Loan on the last day of the then current Interest Period for such Loan or (if outstanding as an ABR Loan) will remain as, or (if not then outstanding) will be made as, an ABR Loan. 4.06. NON-RECEIPT OF FUNDS BY ADMINISTRATIVE AGENT. Unless Administrative Agent shall have received written notice from a Lender or Borrower (the "PAYOR") prior to the date on which -56- the Payor is to make payment to Administrative Agent of (in the case of a Lender) the proceeds of a Loan to be made by such Lender hereunder or a payment to Administrative Agent for the account of one or more of the Lenders hereunder (such payment being herein called the "REQUIRED PAYMENT"), which notice shall be effective upon receipt, that the Payor does not intend to make the Required Payment to Administrative Agent, Administrative Agent may assume that the Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make the amount thereof available to the intended recipient(s) on such date; and, if the Payor has not in fact made the Required Payment to Administrative Agent, the recipient(s) of such payment shall, on demand, repay to Administrative Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date (the "ADVANCE DATE") such amount was so made available by Administrative Agent until the date Administrative Agent recovers such amount at a rate PER ANNUM equal to the Federal Funds Rate for such day and, if such recipient(s) shall fail promptly to make such payment, Administrative Agent shall be entitled to recover such amount, on demand, from the Payor, together with interest as aforesaid; PROVIDED, HOWEVER, that if neither the recipient(s) nor the Payor shall return the Required Payment to Administrative Agent within three Business Days of the date such demand was made, then, retroactively to the Advance Date, the Payor and the recipient(s) shall each be obligated to pay interest on the Required Payment as follows (without double recovery): (i) if the Required Payment shall represent a payment to be made by Borrower to the Lenders, Borrower and the recipient(s) shall each be obligated retroactively to the Advance Date to pay interest in respect of the Required Payment at the rate set forth in Section 3.02(b) (without duplication of the obligation of Borrower under Section 3.02 to pay interest on the Required Payment at the rate set forth in Section 3.02(b)), it being understood that the return by the recipient(s) of the Required Payment to Administrative Agent shall not limit such obligation of Borrower under Section 3.02 to pay interest at the rate set forth in Section 3.02(b) in respect of the Required Payment; and (ii) if the Required Payment shall represent proceeds of a Loan to be made by the Lenders to Borrower, the Payor, or Borrower, shall each be obligated retroactively to the Advance Date to pay interest in respect of the Required Payment pursuant to Section 3.02, it being understood that the return by Borrower of the Required Payment to Administrative Agent shall not limit any claim Borrower may have against the Payor in respect of such Required Payment. 4.07. RIGHT OF SETOFF; SHARING OF PAYMENTS; ETC. (a) If any Event of Default shall have occurred and be continuing, each Obligor agrees that, in addition to (and without limitation of) any right of setoff, banker's lien or counterclaim a Lender may otherwise have, each Lender shall be entitled, at its option (to the fullest extent permitted by law), to set off and apply any deposit (general or special, time or demand, provisional or final), or other indebtedness, held by it for the credit or account of such Obligor at any of its offices, in Dollars or in any other currency, against any principal of or interest on any of such Lender's Loans, Reimbursement Obligations or any other amount payable to such Lender hereunder that is not paid when due (regardless of whether such deposit or other indebtedness is then due to such Obligor), in which case it shall promptly notify such Obligor and Administrative Agent thereof; PROVIDED, HOWEVER, that such Lender's failure to give such notice shall not affect the validity thereof. -57- (b) Each of the Lenders agrees that, if it should receive (other than pursuant to Section 5 or the Fee Letter or the Administrative Agent's Fee Letter) any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise) which is applicable to the payment of the principal of, or interest on, the Loans, Reimbursement Obligations or fees, the sum of which with respect to the related sum or sums received by other Lenders is in a greater proportion than the total of such amounts then owed and due to such Lender bears to the total of such amounts then owed and due to all of the Lenders immediately prior to such receipt, then such Lender receiving such excess payment shall purchase for cash without recourse or warranty from the other Lenders an interest in the Obligations of the respective Obligor to such Lenders in such amount as shall result in a proportional participation by all of the Lenders in such amount; PROVIDED, HOWEVER, that if all or any portion of such excess amount is thereafter recovered from such Lender, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. Borrower consents to the foregoing arrangements. (c) Borrower agrees that any Lender so purchasing such a participation may exercise all rights of setoff, banker's lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of Loans or other amounts (as the case may be) owing to such Lender in the amount of such participation. (d) Nothing contained herein shall require any Lender to exercise any such right or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other Indebtedness or obligation of any Obligor. If, under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section 4.07 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section 4.07 to share in the benefits of any recovery on such secured claim. Section 5. YIELD PROTECTION, ETC. 5.01. ADDITIONAL COSTS. (a) If the adoption of, or any change in, in each case after the date hereof, any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority or the NAIC made subsequent to the date hereof: (i) shall subject any Lender or L/C Lender to any tax of any kind whatsoever with respect to this Agreement, any Note, any Letter of Credit or any Lender's participation therein, any L/C Document or any Loan made by it or change the basis of taxation of payments to such Lender in respect thereof by any Governmental Authority (except for taxes covered by or expressly excluded from coverage by Section 5.06, changes in the rate of tax on the overall net income or net profits of such Lender or its Applicable Lending Office, or any affiliate thereof or franchise taxes or similar taxes imposed with respect to or in lieu of its net income or net profits by any Governmental Authority); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for -58- the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender or L/C Lender which is not otherwise included in the determination of the LIBO Rate hereunder; or (iii) shall impose on such Lender or L/C Lender any other condition (excluding taxes); and the result of any of the foregoing is to increase the cost to such Lender or L/C Lender, by an amount which such Lender or L/C Lender deems to be material (and it is the policy of such Lender or L/C Lender to seek reimbursement from a borrower for such amount), of making, converting into, continuing or maintaining LIBOR Loans or issuing or participating in Letters of Credit or to reduce any amount receivable hereunder in respect thereof then, in any such case, Borrower shall, within 10 days of written demand therefor, pay such Lender or L/C Lender any additional amounts necessary to compensate such Lender or L/C Lender on a net after-tax basis (taking into account any additional tax costs or tax benefits) for such increased cost or reduced amount receivable. If any Lender or L/C Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify Borrower, through Administrative Agent, of the event by reason of which it has become so entitled. (b) In the event that any Lender or L/C Lender shall have determined that the adoption after the date hereof of any law, rule, regulation or guideline regarding capital adequacy (or any change after the date hereof therein or in the interpretation or application thereof) or compliance by any Lender or L/C Lender or any corporation controlling such Lender or L/C Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any central bank or other Governmental Authority or the NAIC, in each case, made subsequent to the date hereof including, without limitation, the issuance after the date hereof of any final rule, regulation or guideline, does or shall have the effect of reducing the rate of return on such Lender's or L/C Lender's or such corporation's capital as a consequence of its obligations hereunder or under any Letter of Credit to a level below that which such Lender or L/C Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or L/C Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender or L/C Lender to be material, then from time to time, after submission by such Lender or L/C Lender to Borrower (with a copy to Administrative Agent) of a written request therefor, Borrower shall promptly pay to such Lender or L/C Lender such additional amount or amounts as will compensate such Lender or L/C Lender for such reduction. (c) A certificate as to any additional amounts setting forth in reasonable detail the calculation of additional amounts payable pursuant to this Section 5.01 submitted by such Lender or L/C Lender, through Administrative Agent, to Borrower shall be conclusive in the absence of clearly demonstrable error. Without limiting the survival of any other covenant hereunder, this Section 5.01 shall survive the termination of this Agreement and the payment of the Notes and all other Obligations payable hereunder. 5.02. INABILITY TO DETERMINE INTEREST RATE. If prior to the first day of any Interest Period: (a) Administrative Agent shall have determined (which determination shall be conclusive and binding upon Borrower) that, by reason of circumstances affecting the relevant market, adequate and -59- reasonable means do not exist for ascertaining the LIBOR Base Rate for such Interest Period, or (b) Administrative Agent shall have received notice from Majority Lenders that the LIBOR Base Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or any affiliate of any such Lender from which such Lender customarily obtains funds) (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to Borrower and the Lenders as soon as practicable thereafter. If such notice is given (x) any LIBOR Loans requested to be made on the first day of such Interest Period shall be made as ABR Loans, (y) any Loans that were to have been Converted on the first day of such Interest Period to LIBOR Loans shall be Converted to or Continued as ABR Loans and (z) any outstanding LIBOR Loans shall be Converted, on the first day of such Interest Period, to ABR Loans. Until such notice has been withdrawn by Administrative Agent, no further LIBOR Loans shall be made or Continued as such, nor shall Borrower have the right to Convert Loans to, LIBOR Loans. 5.03. ILLEGALITY. Notwithstanding any other provision of this Agreement, in the event that any change after the date hereof in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender or L/C Lender or its Applicable Lending Office to honor its obligation to make or maintain LIBOR Loans or issue Letters of Credit hereunder (and, in the sole opinion of such Lender or L/C Lender, the designation of a different Applicable Lending Office would either not avoid such unlawfulness or would be disadvantageous to such Lender or L/C Lender), then such Lender or L/C Lender shall promptly notify Borrower thereof (with a copy to Administrative Agent) and such Lender's or L/C Lender's obligation to make or Continue, or to Convert Loans of any other Type into, LIBOR Loans or issue Letters of Credit shall be suspended until such time as such Lender or L/C Lender may again make and maintain LIBOR Loans or issue Letters of Credit (in which case the provisions of Section 5.04 shall be applicable). 5.04. TREATMENT OF AFFECTED LOANS. If the obligation of any Lender to make LIBOR Loans or to Continue, or to Convert ABR Loans into, LIBOR Loans shall be suspended pursuant to Section 5.03, such Lender's LIBOR Loans shall be automatically Converted into ABR Loans on the last day(s) of the then current Interest Period(s) for such LIBOR Loans (or on such earlier date as such Lender may specify to Borrower with a copy to Administrative Agent as is required by law) and, unless and until such Lender gives notice as provided below that the circumstances specified in Section 5.03 which gave rise to such Conversion no longer exist: (i) to the extent that such Lender's LIBOR Loans have been so Converted, all payments and prepayments of principal which would otherwise be applied to such Lender's LIBOR Loans shall be applied instead to its ABR Loans; and (ii) all Loans which would otherwise be made or Continued by such Lender as LIBOR Loans shall be made or Continued instead as ABR Loans and all ABR Loans of such Lender which would otherwise be Converted into LIBOR Loans shall remain as ABR Loans. If such Lender gives notice to Borrower with a copy to Administrative Agent that the circumstances specified in Section 5.03 which gave rise to the Conversion of such Lender's LIBOR Loans pursuant to this Section 5.04 no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when LIBOR Loans are outstanding, such Lender's ABR Loans -60- shall be automatically Converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding LIBOR Loans, to the extent necessary so that, after giving effect thereto, all Loans held by the Lenders holding LIBOR Loans and by such Lender are held PRO RATA (as to principal amounts, Types and Interest Periods) in accordance with their respective Commitments. 5.05. COMPENSATION. (a) Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of (1) default by Borrower in payment when due of the principal amount of or interest on any LIBOR Loan, (2) default by Borrower in making a borrowing of, Conversion into or Continuation of LIBOR Loans after Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (3) default by Borrower or in making any prepayment of LIBOR Loans after Borrower has given a notice thereof in accordance with the provisions of this Agreement, or (4) the Conversion or the making of a payment or a prepayment of LIBOR Loans on a day which is not the last day of an Interest Period with respect thereto, including in each case, any such loss (including loss of margin) or expense arising from the reemployment of funds obtained by it or from fees payable to terminate the deposits from which such funds were obtained. (b) For the purpose of calculation of all amounts payable to a Lender under this Section 5.05 each Lender shall be deemed to have actually funded its relevant LIBOR Loan through the purchase of a deposit bearing interest at the LIBO Rate in an amount equal to the amount of the LIBOR Loan and having a maturity comparable to the relevant Interest Period; PROVIDED, HOWEVER, that each Lender may fund each of its LIBOR Loans in any manner it sees fit, and the foregoing assumption shall be utilized only for the calculation of amounts payable under this subsection. Any Lender requesting compensation pursuant to this Section 5.05 will furnish to Administrative Agent, Borrower a certificate setting forth in reasonable detail the basis and amount of such request and such certificate, absent manifest error, shall be conclusive. Without limiting the survival of any other covenant hereunder, this covenant shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder. 5.06. NET PAYMENTS. (a) Except as provided in Section 5.06(b), all payments made by any Obligor hereunder or under any Note or any Guarantee will be made without setoff, counterclaim or other defense. Except as provided in Section 5.06(b), all such payments will be made free and clear of, and without deduction or withholding for, any present or future Taxes now or hereafter imposed by any Governmental Authority or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding any Excluded Tax) and all interest, penalties or similar liabilities with respect thereto (all such Taxes (other than Excluded Taxes) being referred to collectively as "COVERED TAXES"). If any Covered Taxes are so levied or imposed, each Obligor agrees on a joint and several basis to pay the full amount of such Covered Taxes, and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement, the Guarantees or under any Note, after withholding or deduction for or on account of any Covered Taxes, will not be less than the amount provided for herein or in such Note. Each Obligor will furnish to Administrative Agent within 45 days after the date the payment of any Covered Taxes is due pursuant to applicable law certified copies of tax receipts or other documentation reasonably satisfactory to such Lender evidencing such payment by such Obligor. The Obligors agree to jointly and severally indemnify and hold harmless each Lender, and reimburse such Lender upon its written request, for the -61- amount of any Covered Taxes so levied or imposed and paid by such Lender and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. "EXCLUDED TAXES" shall mean any Tax (other than any Other Taxes) (i) imposed on or measured by the net income or net profits of a Lender pursuant to the laws of the jurisdiction in which it is organized or the jurisdiction in which the principal office or Applicable Lending Office of such Lender is located or any jurisdiction in which such Lender conducts business or any subdivision thereof or therein, (ii) imposed on any Lender in the nature of franchise Taxes or other similar Taxes imposed as a result of such Lender doing business in a particular jurisdiction, (iii) in the case of any Lender organized under the laws of any jurisdiction other than the United States or any state thereof (including the District of Columbia), any Taxes imposed by the United States by means of withholding at the source unless such withholding results from a change in applicable law, treaty or regulations or the interpretation or administration thereof (including, without limitation, any guideline or policy not having the force of law) by any authority charged with the administration thereof subsequent to the date such Lender becomes a Lender with respect to the Loan or portion thereof affected by such change, (iv) any Taxes to which the Lender is subject (to the extent of the Tax rate then in effect) on the date this Agreement is executed or would be subject to such Taxes on such date if a payment hereunder had been received by the Lender on such date and with respect to any Lender that becomes a party hereto after the date hereof, any Taxes to which such Lender is subject on the date it becomes a party hereto (other than Taxes which each of the other Lenders is entitled to reimbursements for pursuant to the terms of this Agreement) and (v) Taxes to which the Lender becomes subject subsequent to the date referred to in clause (iv) above as a result of a change in the residence, place of incorporation, or principal place of business of the Lender, a change in the branch or lending office of the Lender participating in the transactions set forth herein or other similar circumstances or as a result of the recognition by the Lender of gain on the sale, assignment or participation by the Lender of the participating interests in its creditor positions hereunder. (b) Each Lender that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) (a "NON-U.S. LENDER") agrees to deliver to Borrower and Administrative Agent on or prior to the Closing Date or, in the case of a Lender that is an assignee or transferee of an interest under this Agreement pursuant to Section 12.06 (unless the assigned or transferee Lender was already a Lender hereunder immediately prior to such assignment or transfer and was in compliance with this Section 5.06(b) as of the date of such assignment or transfer), on the date of such assignment or transfer to such Lender, (i) two accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms) certifying to such Lender's entitlement to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement and under any Note or any Guarantee (or, with respect to any assignee Lender, at least as extensive as the assigning Lender), or (ii) if the Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate substantially in the form of EXHIBIT J (any such certificate, a "FOREIGN LENDER CERTIFICATE") and (y) two accurate and complete original signed copies of Internal Revenue Service Form W-8 (or successor form) certifying to such Lender's entitlement to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement and under any Note (or, with respect to any assignee Lender, at least as extensive as the assigning Lender). In addition, each Lender agrees that from time to time after the Closing Date, when a lapse in time or change in circumstances renders the previous certification obsolete or inaccu- -62- rate in any material respect, it will deliver to Borrower and Administrative Agent two new accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001, or Form W-8 and a Foreign Lender Certificate, as the case may be, and such other forms as may be required in order to confirm or establish the entitlement of such Lender to a continued exemption from or reduction in United States withholding tax with respect to payments under this Agreement and any Note or any Guarantee, or it shall immediately notify Borrower and Administrative Agent of its inability to deliver any such Form or Certificate, in which case such Lender shall not be required to deliver any such form or certificate pursuant to this Section 5.06(b) for so long as such payments may be made free from United States withholding tax. Notwithstanding the foregoing, no Lender shall be required to deliver any such form or certificate if a change in treaty, law or regulation has occurred prior to the date on which such delivery would otherwise be required that renders any such form or certificate inapplicable or would prevent the Lender from duly completing and delivering any such form or certificate with respect to it and such Lender so advises Borrower. No Obligor shall be required to indemnify any Non-U.S. Lender, or to pay any additional amounts to any Non-U.S. Lender, in respect of any Covered Taxes to the extent that the obligation to pay such Covered Taxes would not have arisen but for a failure by such Non-U.S. Lender to comply with the provisions of this Section 5.06(b). (c) In addition, Borrower agrees to pay any stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under the Notes or from the execution, delivery, filing, recordation or registration of, or otherwise with respect to, this Agreement or the Notes (hereinafter referred to as "OTHER TAXES"). (d) Any Lender claiming any additional amounts payable pursuant to this Section 5.06 agrees to use (at the Obligors' expense) reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office if the making of such change would avoid the need for, or in the opinion of such Lender materially reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the sole judgment of such Lender, be otherwise disadvantageous to such Lender. Section 6. GUARANTEE. 6.01. THE GUARANTEE. The Guarantors hereby jointly and severally guarantee as a primary obligor and not as a surety to each Creditor and their respective successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the principal of and interest (including any interest, fees, costs or charges that would accrue but for the provisions of the Bankruptcy Code after any bankruptcy or insolvency petition under the Bankruptcy Code) on the Loans made by the Lenders to, and the Notes held by each Lender of, Borrower, and all other Obligations from time to time owing to the Creditors by any Obligor under any Credit Document or Swap Contract relating to the Loans, in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the "GUARANTEED OBLIGATIONS"). The Guarantors hereby jointly and severally agree that if Borrower or other Guarantor(s) shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Guaranteed Obligations, the Guarantors will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. -63- 6.02. OBLIGATIONS UNCONDITIONAL. The obligations of the Guarantors under Section 6.01 shall constitute a guaranty of payment and are absolute, irrevocable and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the Guaranteed Obligations of Borrower under this Agreement, the Notes or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or Guarantor (except for payment in full). Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantors hereunder which shall remain absolute, irrevocable and unconditional under any and all circumstances as described above: (i) at any time or from time to time, without notice to the Guarantors, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived; (ii) any of the acts mentioned in any of the provisions of this Agreement or the Notes or any other agreement or instrument referred to herein or therein shall be done or omitted; (iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be amended in any respect, or any right under the Credit Documents or any other agreement or instrument referred to herein or therein shall be amended or waived in any respect or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; (iv) any lien or security interest granted to, or in favor of, L/C Lender or any Lender or Agent as security for any of the Guaranteed Obligations shall fail to be perfected; or (v) the release of any other Guarantor. The Guarantors hereby expressly waive diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that any Creditor thereof exhaust any right, power or remedy or proceed against Borrower under this Agreement or the Notes or any other agreement or instrument referred to herein or therein, or against any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations. The Guarantors waive any and all notice of the creation, renewal, extension, waiver, termination or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by any Creditor thereof upon this guarantee or acceptance of this guarantee, and the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this guarantee, and all dealings between Borrower and the Creditors shall likewise be conclusively presumed to have been had or consummated in reliance upon this guarantee. This guarantee shall be construed as a continuing, absolute, irrevocable and unconditional guarantee of payment without regard to any right of offset with respect to the Guaranteed Obligations at any time or from time to time held by the Creditors, and the obligations and liabilities of the Guarantors hereunder shall not be conditioned or contingent upon the pursuit by the Creditors -64- or any other Person at any time of any right or remedy against Borrower or against any other Person which may be or become liable in respect of all or any part of the Guaranteed Obligations or against any collateral security or guarantee therefor or right of offset with respect thereto. This guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantors and the successors and assigns thereof, and shall inure to the benefit of the Lenders, and their respective successors and assigns, notwithstanding that from time to time during the term of this Agreement there may be no Guaranteed Obligations outstanding. 6.03. REINSTATEMENT. The obligations of the Guarantors under this Section 6 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of Borrower or other Obligor in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise. The Guarantors jointly and severally agree that they will indemnify each Creditor on demand for all reasonable out-of-pocket costs and expenses (including reasonable fees of counsel) incurred by such Creditor in connection with such rescission or restoration, including any such reasonable out-of-pocket costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law, other than any costs or expenses resulting from the gross negligence, willful misconduct or bad faith of such Creditor. 6.04. SUBROGATION; SUBORDINATION. Each Guarantor hereby agrees that until the indefeasible payment and satisfaction in full in cash of all Guaranteed Obligations and the expiration and termination of the Commitments of the Lenders under this Agreement it shall not exercise any right or remedy arising by reason of any performance by it of its guarantee in Section 6.01, whether by subrogation or otherwise, against Borrower or any other Guarantor of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations. The payment of any amounts due with respect to any indebtedness of Borrower or any other Guarantor now or hereafter owing to any Guarantor or Borrower by reason of any payment by such Guarantor under the Guarantee in this Section 6 is hereby subordinated to the prior indefeasible payment in full in cash of the Guaranteed Obligations. Each Guarantor agrees that it will not demand, sue for or otherwise attempt to collect any such indebtedness of Borrower to such Guarantor until the Obligations shall have been indefeasibly paid in full in cash. If, notwithstanding the foregoing sentence, any Guarantor shall prior to the indefeasible payment in full in cash of the Guaranteed Obligations collect, enforce or receive any amounts in respect of such indebtedness, such amounts shall be collected, enforced and received by such Guarantor as trustee for Creditors and be paid over to Administrative Agent on account of the Guaranteed Obligations without affecting in any manner the liability of such Guarantor under the other provisions of the guaranty contained herein. 6.05. REMEDIES. The Guarantors jointly and severally agree that, as between the Guarantors and the Lenders, the obligations of Borrower under this Agreement and the Notes may be declared to be forthwith due and payable as provided in Section 10 (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section 10) for purposes of Section 6.01, notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against Borrower and that, in the event of such declaration (or such obligations being deemed to have become automatically due and -65- payable), such obligations (whether or not due and payable by Borrower) shall forthwith become due and payable by the Guarantors for purposes of Section 6.01. 6.06. INSTRUMENT FOR THE PAYMENT OF MONEY. Each Guarantor hereby acknowledges that the guarantee in this Section 6 constitutes an instrument for the payment of money, and consents and agrees that any Lender or Agent, at its sole option, in the event of a dispute by such Guarantor in the payment of any moneys due hereunder, shall have the right to bring a motion-action under New York CPLR Section 3213. 6.07. CONTINUING GUARANTEE. The guarantee in this Section 6 is a continuing guarantee of payment, and shall apply to all Guaranteed Obligations whenever arising. 6.08. GENERAL LIMITATION ON GUARANTEE OBLIGATIONS. In any action or proceeding involving any state corporate law, or any state, Federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Guarantor under Section 6.01 would otherwise be held or determined to be void, voidable, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 6.01, then, notwithstanding any other provision to the contrary, the amount of such liability shall, without any further action by such Guarantor, any Creditor or any other Person, be automatically limited and reduced to the highest amount that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding. Section 7. CONDITIONS PRECEDENT. 7.01. CONDITIONS TO EFFECTIVENESS. The effectiveness of this Agreement and the obligation of the Lenders to make any initial extension of credit hereunder (whether by making a Loan or issuing a Letter of Credit) is subject to the satisfaction of the conditions precedent (the date of the satisfaction (or waiver) of each of the following conditions, the "CLOSING DATE"): (i) DOCUMENTATION AND EVIDENCE OF CERTAIN MATTERS. Lead Arranger shall have received the following documents, each duly executed where appropriate (with sufficient conformed copies for each Lender), each of which shall be reasonably satisfactory to Lead Arranger in form and substance: (1) ORGANIC DOCUMENTS. Certified true and complete copies of the Organic Documents and all amendments thereto (or equivalent documents) of each Obligor and of all corporate authority for each Obligor (including board of director resolutions and evidence of the incumbency, including specimen signatures, of officers) with respect to the execution, delivery and performance of such of the Credit Documents to which such Obligor is intended to be a party and each other document to be delivered by such Obligor from time to time in connection herewith and the extensions of credit hereunder and the consummation of the Transactions, certified as of the Closing Date as complete and correct copies thereof by the Secretary or an Assistant Secretary of such Obligor. -66- (2) OFFICERS' CERTIFICATE. An Officers' Certificate of Borrower, dated the Closing Date, (x) to the effect set forth in clauses (a) and (b) of Section 7.04(i), (y) to the effect that all conditions precedent to the making of such initial extension of credit have been satisfied and (z) stating that (a) all requisite material Governmental Authorities and material third parties have approved or consented to the Closing Date Transactions to the extent required (without the imposition of any materially burdensome or materially adverse conditions or requirements in the judgment of Lead Arranger), (b) all such approvals are in full force and effect and (c) there is no Proceeding, actual or threatened, that has or could have a reasonable likelihood of restraining, preventing or imposing materially burdensome conditions on any of the Transactions or the other transactions contemplated hereby. Lead Arranger shall have received copies (certified by Borrower as true and correct) of any such approvals or consents so obtained. (3) OPINIONS OF COUNSEL. Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Obligors, substantially in the form of EXHIBIT E-1. (4) NOTES. The Notes, duly completed and executed for each Lender that has requested Notes prior to the Closing Date. (5) THE CREDIT AGREEMENT. This Agreement, (i) executed and delivered by a duly authorized officer of each Obligor, and (ii) executed and delivered by a duly authorized officer of each Lender and Agent. (6) SECURITY DOCUMENTS. The Security Agreement, such other pledge agreements required under local law in the judgment of counsel to Administrative Agent and requested reasonably in advance of the intended Closing Date (each of which shall be in full force and effect) and the Perfection Certificate, substantially in the form of EXHIBIT M, duly authorized, executed and delivered by the Obligors and Administrative Agent, and the certificates identified under the name of such Obligors in Schedule I-A and Schedule I-B to the Security Agreement, accompanied by undated stock powers, instruments of assignment or issuer acknowledgements executed in blank if applicable, and the Intercompany Notes identified under the name of such Obligors in Schedule II to the Security Agreement, accompanied by undated notations or instruments of assignment executed in blank. (7) ACQUISITION AGREEMENT. Executed copies of the Allentown Acquisition Agreement and the Aurora Acquisition Agreement and all exhibits, appendices, annexes and schedules to any thereof, each certified by a senior officer of Borrower as true, complete and correct copies thereof, the terms, conditions and structure of which shall be in form and substance satisfactory to the Lead Arranger in its sole discretion. (8) SOLVENCY CERTIFICATE. A certificate in the form of EXHIBIT C-2 from the chief financial officer of Borrower in form and substance reasonably satisfactory -67- to Lead Arranger with respect to the Solvency (on a consolidated basis) of each Obligor immediately after the consummation of the Closing Date Transactions. (9) INSURANCE. Evidence of insurance complying with the requirements of Section 9.04 and the Security Documents and certificates naming Administrative Agent as an additional insured and/or loss payee, and stating that such insurance shall not be canceled or revised without 30 days prior written notice by the insurer to Administrative Agent. (ii) REPAYMENT OF EXISTING CREDIT FACILITIES. Borrower shall have effected the Existing Credit Facilities Repayment and repaid the Existing Notes on terms and conditions and pursuant to documentation reasonably satisfactory to Lead Arranger. All Liens in respect of the Existing Credit Facilities shall have been released and Lead Arranger shall have received evidence thereof reasonably satisfactory to Lead Arranger and a "pay-off" letter or letters reasonably satisfactory to Lead Arranger with respect to the Existing Credit Facilities Repayment; in addition, from any Person holding any Lien securing any such Indebtedness, such Uniform Commercial Code termination statements, mortgage releases and other instruments, in each case in proper form for recording, as Lead Arranger shall have reasonably requested to release and terminate of record the Liens securing such Indebtedness (or arrangements for such release and termination reasonably satisfactory to Lead Arranger shall have been made). (iii) HOLDCO NOTES. Borrower shall have received a capital contribution from Holdco from the net proceeds of the issuance of the Holdco Notes (the gross amount of which shall be not less than $60.0 million). (iv) EQUITY COMMITMENT. The Lenders shall have received a commitment in favor of the Lenders from certain investors for an equity contribution to Holdings (and Holdings shall have agreed to contribute the proceeds thereof to Borrower) of $85.0 million to finance the Aurora Acquisition (the "AURORA EQUITY INVESTMENT") and $27.0 million to finance the Allentown Acquisition (the "ALLENTOWN EQUITY INVESTMENT") and the documentation therefor will be in form and substance satisfactory to the Lead Arranger. (v) NO OTHER DEBT OR PREFERRED STOCK; CAPITAL STRUCTURE. After giving effect to the Transactions and the other transactions contemplated hereby, (A) Borrower and its Subsidiaries shall have outstanding no Funded Indebtedness or preferred stock (or direct or indirect guarantee or other credit support in respect thereof) outstanding other than the Loans and the Indebtedness listed in Schedule 8.24(B)and (B) Holdco shall have outstanding no Funded Indebtedness or preferred stock (or direct or indirect guarantee or other credit support in respect thereof) outstanding other than the Holdco Notes. The Lead Arranger shall be satisfied with the proposed and actual capitalization and corporate and organizational structure of Holdco and Borrower and its subsidiaries (after giving effect to the Transactions) (vi) NO MATERIAL ADVERSE CHANGE. There shall not have occurred or become known any material adverse change, or any condition or event that could reasonably be expected to result in a material adverse change, in the business, results of operations, financial condition or assets of (a) Borrower and its subsidiaries taken as a whole since December 31, 1999 or (b) -68- Aurora and its Subsidiaries (including their predecessors) taken as a whole since December 31, 1998 (in each case both before and after giving effect to the Transactions). (vii) PRO FORMA BALANCE SHEET. The Lenders shall have received pro forma consolidated balance sheets of Holdco and Borrower dated as of the date of the most recently available financial statements after giving effect to the Transactions, which balance sheet shall be consistent in all material respects with the sources and uses of funds agreed to by Borrower and the Lead Arranger and the forecast previously provided to the Lenders. (viii) PROJECTIONS. The Lenders shall have received a business plan for Borrower and its subsidiaries after giving effect to the Transactions for the remainder of fiscal years 2000 and the fiscal years 2001 through 2008 and a satisfactory written analysis of the business and prospects of Borrower and its subsidiaries for the period from the Closing Date through the final maturity of the Credit Facilities, all in form and substance satisfactory to the Lenders (in their sole discretion). The Lenders shall have received projected cash flows and income statements for the period of eight years following the Closing Date, which projections shall be (i) based upon reasonable assumptions made in good faith (it being recognized that projections as to future events are not to be viewed as facts, and that the actual results may differ materially from projected results) and (ii) substantially in conformity with those projections previously delivered to the Lenders. (ix) FINANCIAL STATEMENTS. The Lenders shall have received (i) audited consolidated financial statements of Borrower for fiscal years 1997 through 1999 and of Aurora for fiscal years 1997 through 1998 and pro forma financial statements giving effect to the Transactions, in each case meeting the requirements of Regulation S-X for a form S-1 registration statement under the Securities Act of 1933 and (ii) unaudited interim consolidated financial statements of Borrower for each fiscal month and quarterly period ended subsequent to December 31, 1999 as to which such financial statements are available all of which shall be consistent in all material respects with information previously provided to the Lenders. (x) APPROVALS. All requisite material Governmental Authorities and material third parties have approved or consented to the Closing Date Transactions to the extent required (without the imposition of any materially burdensome or materially adverse conditions or requirements in the reasonable judgment of Lead Arranger), all such approvals are in full force and effect, all applicable appeal periods have expired and there shall be no Proceeding, actual or threatened, that has or could have a reasonable likelihood of restraining, preventing or imposing materially burdensome conditions on any of the Transactions or the other transactions contemplated hereby. (xi) PAYMENT OF FEES AND EXPENSES. All accrued and unpaid fees and expenses (including the fees and expenses of Cahill Gordon & Reindel and of local counsel to Lead Arranger) of the Lenders and Lead Arranger in connection with the Credit Documents shall have been paid. (xii) MINIMUM EBITDA. Lead Arranger shall have received reasonably satisfactory evidence (including reasonably satisfactory supporting schedules and other data) that (A) -69- combined annualized EBITDA (calculated in a manner reasonably acceptable to Lead Arranger) of Borrower, Aurora, the Allentown Assets and their respective Subsidiaries after giving effect to the Transactions based on results of operations for the six months ended December 31, 1999 would not be less than $19.7 million and (B) the Total Leverage Ratio (calculated on a pro forma basis to give effect to the Transactions) shall not be greater than 6.0. (xiii) TRANSACTION FEES. Lead Arranger shall have received satisfactory evidence that fees and expenses (excluding certain advisory fees and underwriting fees relating to any issuance of equity) in connection with financing and closing the Transactions will not exceed $8.0 million. (xiv) NO LEGAL BAR. No Law shall be applicable in the reasonable judgment of Lead Arranger that restrains, prevents or imposes material adverse conditions upon any component of the Transactions or the financing thereof, including the Credit Facilities. (xv) FILINGS AND LIEN SEARCHES. The Obligors shall have authorized, executed and delivered each of the following: (1) UCC Financing Statements (Form UCC-1) in appropriate form for filing under the UCC and any other applicable law, rule or regulation in each jurisdiction as may be necessary or appropriate to perfect the Liens created, or purported to be created, by the Security Documents; (2) certified copies of Requests for Information (Form UCC-11), tax lien, judgment lien and pending lawsuit searches or equivalent reports or lien search reports, each of a recent date listing all effective financing statements, lien notices or comparable documents that name any Obligor as debtor and that are filed in those state, county and other jurisdictions in which any of the Collateral of such Obligor is located, the state, county and other jurisdictions in which each such Person's principal place of business is located and the state in which such Person is organized, none of which encumber the Collateral covered or intended to be covered by the Security Agreement other than those encumbrances which constitute Prior Liens and other Liens expressly permitted by the terms of the applicable Security Document; and (3) evidence of arrangements for (A) the completion of all recordings and filings of, or with respect to, the Security Documents, including, to the extent required by Lead Arranger, filings with the United States Patent and Trademark Office and United States Copyright Office, and (B) the taking of all actions as may be necessary or, in the opinion of Agents, desirable, to perfect the Liens created, or purported to be created, by the Security Documents. 7.02. CONDITIONS TO TERM A-1 FACILITY LOAN AND TERM C FACILITY LOAN. The obligation of the Lenders to make Term A-1 Facility Loans and Term C Facility Loans is subject to the satisfaction of the conditions precedent that the Closing Date shall have occurred and to the satisfaction of the additional conditions precedent that: -70- (i) OFFICERS' CERTIFICATE. Lead Arranger shall have received an Officers' Certificate of Borrower (x) to the effect set forth in clauses (a) and (b) of Section 7.04(i), (y) to the effect that all conditions precedent to the making of such Loans have been satisfied and (z) stating that (a) all requisite material Governmental Authorities and material third parties have approved or consented to the Aurora Acquisition and the Aurora Debt Repayment to the extent required (without the imposition of any materially burdensome or materially adverse conditions or requirements in the judgment of Lead Arranger), (b) all such approvals are in full force and effect and all applicable appeal periods have expired and (c) there is no Proceeding, actual or threatened, that has or could have a reasonable likelihood of restraining, preventing or imposing materially burdensome conditions on any of the Aurora Acquisition, the Aurora Debt Repayment and the financing thereof. Lead Arranger shall have received copies (certified by Borrower as true and correct) of any such approvals or consents so obtained. (ii) ACQUISITION AGREEMENT IN FULL FORCE AND EFFECT; FILINGS. The Aurora Acquisition Agreement shall be in full force and effect. Lead Arranger shall have received copies, certified by Borrower, of all filings made with any Governmental Authority in connection with the Aurora Acquisition. (iii) CONSUMMATION OF TRANSACTIONS. The Aurora Acquisition and the Aurora Debt Repayment shall have been (or shall be contemporaneously) consummated in all material respects in accordance with the terms hereof and the terms of documentation therefor (without the material waiver or material amendment of any material condition unless consented to by Lead Arranger and the Lenders) that are in form and substance reasonably satisfactory to Lead Arranger (with any material condition therein requiring the satisfaction or consent of any Person other than Lead Arranger or the Lenders being deemed to require the reasonable satisfaction or consent of Lead Arranger and the Lenders). Each of the parties thereto shall have complied in all material respects with all covenants set forth in the Aurora Acquisition Agreement (without the waiver of performance under or amendment of any of the material terms thereof unless consented to by Lead Arranger and the Lenders). Lead Arranger confirms that the Aurora Acquisition Agreement dated as of March 24, 2000 is in form and substance satisfactory to it. (iv) MAXIMUM ACQUISITION PRICE. The consideration paid in connection with the Aurora Acquisition shall consist of equity interests in Holdco valued at $35.0 million, $65.0 million in assumed debt (the "AURORA DEBT") and $85.0 million in cash (subject to adjustment post-closing as set forth in the Aurora Acquisition Agreement). (v) AURORA DEBT REPAYMENT. Borrower shall have effected the Aurora Debt Repayment on terms and conditions and pursuant to documentation reasonably satisfactory to Lead Arranger. All Liens in respect of the Aurora Debt shall have been released and Lead Arranger shall have received evidence thereof reasonably satisfactory to Lead Arranger and a "pay-off" letter or letters reasonably satisfactory to Lead Arranger with respect to the Aurora Debt; in addition, from any Person holding any Lien securing any such Indebtedness, such Uniform Commercial Code termination statements, mortgage releases and other instruments, in each case in proper form for recording, as Lead Arranger shall have reasonably requested -71- to release and terminate of record the Liens securing such Indebtedness (or arrangements for such release and termination reasonably satisfactory to Lead Arranger shall have been made). (vi) FINANCIAL STATEMENTS. The Lenders shall have received (i) audited consolidated financial statements of Aurora for fiscal year 1999 meeting the requirements of Regulation S-X for a form S-1 registration statement under the Securities Act of 1933 and (ii) unaudited interim consolidated financial statements of Aurora for each fiscal month and quarterly period ended subsequent to December 31, 1999 as to which such financial statements are available all of which shall be consistent in all material respects with information previously provided to the Lenders. (vii) EQUITY INVESTMENT. Borrower shall have the proceeds from the Aurora Equity Investment from Holdco of at least $85.0 million in cash (or any Equity Issuance effected in lieu thereof). (viii) APPROVALS. All requisite material Governmental Authorities and material third parties have approved or consented to the Aurora Acquisition (including the necessary consent of the FCC with respect to the transfer of the FCC Authorizations) and the Aurora Debt Repayment and the other transactions contemplated hereby to the extent required (without the imposition of any materially burdensome or materially adverse conditions or requirements in the reasonable judgment of Lead Arranger), all such approvals are in full force and effect, all applicable appeal periods have expired and there shall be no Proceeding, actual or threatened, that has or could have a reasonable likelihood of restraining, preventing or imposing materially burdensome conditions on the Aurora Acquisition and the Aurora Debt Repayment or the other transactions contemplated hereby. Lead Arranger shall have received copies (certified by Borrower as true and correct) of any such approvals or consents so obtained. Lead Arranger shall have received satisfactory evidence that all necessary HSR approvals shall have been received on terms and conditions reasonably acceptable to Lead Arranger. (ix) JOINDER AGREEMENT; SECURITY MATTERS. Aurora and its Subsidiaries shall become parties to this Agreement as Guarantors through the execution and delivery of a Joinder Agreement. The Obligors shall have authorized, executed and delivered each of the items described in Section 7.01(xv) with respect to Aurora and its Subsidiaries and shall have otherwise complied with Sections 9.12 and 9.13 hereof. (x) NO MATERIAL ADVERSE CHANGE. There shall not have occurred or become known any material adverse change, or any condition or event that could reasonably be expected to result in a material adverse change, in the business, results of operations, financial condition or assets of Aurora and its Subsidiaries (including their predecessors) taken as a whole since December 31, 1998 (before and after giving effect to the Transactions). 7.03. CONDITIONS TO TERM A-2 FACILITY LOAN. The obligation of the Lenders to make Term A-2 Facility Loans (other than with respect to an aggregate of $5.0 million of Term A-2 Facility Loans to be made on the Closing Date) is subject to the satisfaction of the conditions precedent that the Closing Date shall have occurred and to the satisfaction of the additional conditions precedent that: -72- (i) OFFICERS' CERTIFICATE. Lead Arranger shall have received an Officers' Certificate of Borrower (x) to the effect set forth in clauses (a) and (b) of Section 7.04(i), (y) to the effect that all conditions precedent to the making of such Loans have been satisfied and (z) stating that (a) all requisite material Governmental Authorities and material third parties have approved or consented to the exercise of the LMA Option (and the acquisitions thereunder) to the extent required (without the imposition of any materially burdensome or materially adverse conditions or requirements in the judgment of Lead Arranger), (b) all such approvals are in full force and effect and (c) there is no Proceeding, actual or threatened, that has or could have a reasonable likelihood of restraining, preventing or imposing materially burdensome conditions on the exercise of the LMA Option (and the acquisitions thereunder) and the financing thereof. Lead Arranger shall have received copies (certified by Borrower as true and correct) of any such approvals or consents so obtained. (ii) CONSUMMATION OF TRANSACTIONS. The exercise of the LMA Option shall have been (or shall be contemporaneously) consummated in all material respects in accordance with the terms hereof and the terms of documentation therefor (without the material waiver or material amendment of any material condition unless consented to by Lead Arranger and the Lenders) that are in form and substance reasonably satisfactory to Lead Arranger (with any material condition therein requiring the satisfaction or consent of any Person other than Lead Arranger or the Lenders being deemed to require the reasonable satisfaction or consent of Lead Arranger and the Lenders). Lead Arranger confirms that the LMA Agreements as in effect on the date hereof are in form and substance satisfactory to it. (iii) MAXIMUM ACQUISITION PRICE. The consideration paid in connection with the exercise of the LMA Option shall not exceed $20.5 million (excluding payments made prior to the Closing Date). (iv) APPROVALS. All requisite material Governmental Authorities and material third parties have approved or consented to the exercise of the LMA Option (including the necessary consent of the FCC with respect to the transfer of the FCC Authorizations) and the other transactions contemplated hereby to the extent required (without the imposition of any materially burdensome or materially adverse conditions or requirements in the reasonable judgment of Lead Arranger), all such approvals are in full force and effect, all applicable appeal periods have expired and there shall be no Proceeding, actual or threatened, that has or could have a reasonable likelihood of restraining, preventing or imposing materially burdensome conditions on the exercise of the LMA Option or the other transactions contemplated hereby. Lead Arranger shall have received copies (certified by Borrower as true and correct) of any such approvals or consents so obtained. Lead Arranger shall have received satisfactory evidence that all necessary HSR approvals shall have been received on terms and conditions reasonably acceptable to Lead Arranger. (v) SECURITY MATTERS. The Obligors shall have authorized, executed and delivered each of the items described in Section 7.01(xv) with respect to assets to be acquired pursuant to the LMA Option and shall have otherwise complied with Sections 9.12 and 9.13 hereof. -73- 7.04. CONDITIONS TO INITIAL AND SUBSEQUENT EXTENSIONS OF CREDIT. The obligation of the Lenders to make any Loan or otherwise extend any credit to Borrower upon the occasion of each borrowing or other extension of credit (whether by making a Loan or issuing a Letter of Credit) hereunder (including the initial borrowing) is subject to the further conditions precedent that: (i) NO DEFAULT OR EVENT OF DEFAULT; REPRESENTATIONS AND WARRANTIES TRUE. Both immediately prior to the making of such Loan or other extension of credit and also after giving pro forma effect thereto and to the intended use thereof: (a) no Default or Event of Default shall have occurred and be continuing; (b) the representations and warranties made by the Obligors in Section 8, and by each Obligor in each of the other Credit Documents to which it is a party, shall continue to be accurate in all material respects on and as of the date of the making of such Loan or other extension of credit with the same force and effect as if made on and as of such date (except that any such representation or warranty qualified as to materiality shall continue to be accurate on and as of the date of the making of such Loan or other extension of credit with the same force and effect as if made on and as of such date and except that any representation or warranty that speaks as of a particular date shall be accurate in all material respects as of such date); and (c) the sum of the aggregate amount of the outstanding Revolving Loans PLUS L/C Liabilities shall not exceed the Revolving Commitments then in effect. (ii) NO LEGAL BAR. The Loans and other extensions of credit and the use of proceeds thereof shall not contravene, violate or conflict with, nor involve any Lender in a violation of, any Requirement of Law. (iii) NOTICE OF BORROWING. Administrative Agent shall have received a Notice of Borrowing duly completed and complying with Section 4.05. Each Notice of Borrowing or request for the issuance of a Letter of Credit delivered by Borrower hereunder shall constitute a certification by Borrower to the effect set forth in clauses (i)-(ii) above as of the date of such borrowing or issuance. Each notice submitted by Borrower hereunder for an extension of credit hereunder shall constitute a representation and warranty by Borrower, as of the date of such notice and as of the relevant borrowing date or date of issuance of a Letter of Credit, as applicable, that the applicable conditions in Sections 7.02, 7.03 and 7.04have been satisfied or waived in accordance with the terms hereof. 7.05. DETERMINATIONS UNDER SECTION 7. For purposes of determining compliance with the conditions specified in Sections 7.01, 7.02 and 7.03, each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of Administrative Agent responsible for the transactions contemplated by this Agreement shall have received notice from such Lender prior to the date that Borrower, by notice to the Lenders, designates as the proposed date of the extension of credit, specifying its objection thereto. -74- Section 8. REPRESENTATIONS AND WARRANTIES. Each Obligor represents and warrants to the Lenders that at and as of the Closing Date and at and as of each Funding Date (with respect to Section 8.01 through and including 8.25) (in each case immediately before and immediately after giving effect to the transactions to occur on such date (including, with respect to the Closing Date, the Transactions)): 8.01. CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each Company: (a) is a corporation, partnership, limited liability company or other entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; (b) has all requisite corporate or other power and authority, and has all governmental licenses, authorizations, consents and approvals necessary to own its Property and carry on its business as now being conducted; (c) is qualified to do business and is in good standing in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary; and (d) is in compliance with all Requirements of Law, EXCEPT, in the case of clauses (a), (b), (c) and (d) where the failure thereof individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. Each Company will maintain in full force and effect the FCC Authorizations for the Borrower Stations and shall remain in material compliance with the Communications Act. Borrower shall use its reasonable best efforts to cause the LMA Licensees to maintain in full force and effect the FCC Authorizations for the LMA Stations and to remain in material compliance with the Communications Act. 8.02. FINANCIAL CONDITION; ETC. (A) Borrower has delivered to the Lenders the audited consolidated balance sheets of Holdings and the Subsidiaries as of December 31, 1997, 1998 and 1999, and the related statements of earnings and cash flows for the fiscal years ended on those dates, together with reports thereon by Grant Thornton LLP, certified public accountants. All of said financial statements, including in each case the related schedules and notes, are true, complete and correct and have been prepared in accordance with GAAP consistently applied and present fairly the financial position of Holdings and its Subsidiaries as of the respective dates of said balance sheets and the results of their operations for the respective periods covered thereby. (B) Borrower has delivered to the Lenders (A) the audited consolidated balance sheets of Aurora and the Subsidiaries as of December 31, 1997, 1998 and 1999, and the related statements of earnings, changes in stockholders' equity and cash flows for the fiscal years ended on those dates, together with reports thereon by Deloitte & Touche LLP, Ernst & Young LLP and Weeks Holderbaum Huber & DeGrow LLP, respectively, certified public accountants. All of said financial statements, including in each case the related schedules and notes, are true, complete and correct and have been prepared in accordance with GAAP consistently applied and present fairly the financial position of Aurora and its Subsidiaries as of the respective dates of said balance sheets and the results of their operations for the respective periods covered thereby. (C) Except as set forth in SCHEDULE 8.02(C), in the financial statements or other information referred to in Section 8.02(A) or Section 8.02(B), as of the Closing Date, there are no material liabilities of any Company of any kind required to be set forth on a balance sheet or in the notes thereto prepared in accordance with GAAP, whether accrued, contingent, absolute, determined, de- -75- terminable or otherwise, and there is no existing condition, situation or set of circumstances which is reasonably likely to result in such a liability. (D) Since December 31, 1999 there has been no Material Adverse Change or event or condition which could reasonably be expected to result in a Material Adverse Change. (E) The pro forma balance sheet of Consolidated Companies (the "PRO FORMA BALANCE SHEET"), certified by the chief financial officer of Borrower, copies of which have been delivered to the Lenders, is the balance sheet of Consolidated Companies as of the date of the latest available balance sheet of Borrower prior to the Closing Date (the "PRO FORMA DATE"), adjusted to give effect (as if such events had occurred on such date) to the Transactions and the application of the proceeds of all Indebtedness to be incurred in connection therewith. The Pro Forma Balance Sheet, together with the notes thereto, accurately reflects in all material respects all adjustments necessary to give effect to the Transactions, was prepared based on good faith assumptions, and presents fairly in all material respects on a pro forma basis the consolidated financial position of Consolidated Companies as at the Pro Forma Date, adjusted as described above. 8.03. LITIGATION. Except as set forth in SCHEDULE 8.03, there is no Proceeding (other than any qui tam Proceeding, to which this Section is limited to the best of Borrower's knowledge) pending against, or to the knowledge of Borrower, threatened in writing against or affecting, Holdings, any Company or any of their respective Properties before any Governmental Authority or private arbitrator that may (i) have a reasonable likelihood of being adversely determined and that, if determined or resolved adversely to such Company, could reasonably be expected to have a Material Adverse Effect (ii) challenge the validity or enforceability of any of the Credit Documents or (iii) under the Racketeering Influenced and Corrupt Organizations Act or any similar federal or state statute where such Person is a defendant in a criminal indictment that provides for forfeiture of assets to any Governmental Authority as a criminal penalty. 8.04. NO BREACH; NO DEFAULT. (A) None of the execution, delivery and performance by any Obligor of any Credit Document or Transaction Document to which it is a party nor the consummation of the transactions herein and therein contemplated (including the Transactions) do or will (i) conflict with or result in a breach of, or require any consent (which has not been obtained and is in full force and effect) under, any Organic Document of any Company or any applicable Requirement of Law or any order, writ, injunction or decree of any Governmental Authority binding on Holdings or any Company, or tortiously interfere with, result in a breach of, or require termination of, any term or provision of any Contractual Obligation of Holdings or any Company or (ii) constitute (with due notice or lapse of time or both) a default under any such Contractual Obligation, or (iii) result in the creation or imposition of any Lien (except for the Liens created pursuant to the Security Documents) upon any Property of Holdings or any Company pursuant to the terms of any such Contractual Obligation, except with respect to each of the foregoing which would not have a Material Adverse Effect and which would not subject any Lender to any material risk of damages or liability to third parties. (B) No Default or Event of Default has occurred and is continuing. 8.05. ACTION. Each Company and Holdings has all necessary corporate, partnership, etc. power, authority and legal right to execute, deliver and perform its obligations under each Credit -76- Document and Transaction Document to which it is a party and to consummate the transactions herein and therein contemplated; the execution, delivery and performance by each Company and Holdings of each Credit Document and Transaction Document to which it is a party and the consummation of the transactions herein and therein contemplated have been duly authorized by all necessary corporate, partnership, etc. action on its part; and this Agreement has been duly and validly executed and delivered by each Obligor and constitutes, and each of the Notes and the other Credit Documents to which it is a party when executed and delivered by such Obligor (in the case of the Notes, for value) will constitute, its legal, valid and binding obligation, enforceable against each Obligor in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws of general applicability from time to time in effect affecting the enforcement of creditors' rights and remedies and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 8.06. APPROVALS. No authorizations, approvals or consents of, and no filings or registrations with, any Governmental Authority or any securities exchange are necessary for the execution, delivery or performance by Holdings or any Company of the Credit Documents and the Transaction Documents to which it is a party or for the legality, validity or enforceability hereof or thereof or for the consummation of the transactions herein and therein contemplated, except for filings and recordings in respect of the Liens created pursuant to the Security Documents and except for consents, authorizations and filings that have been obtained or made and are in full force and effect or the failure of which to obtain would not have a Material Adverse Effect. 8.07. REPRESENTATIONS AND WARRANTIES IN THE ACQUISITION AGREEMENTS. The representations and warranties set forth in the Aurora Acquisition Agreement made by Borrower and, to the best of Borrower's knowledge after due inquiry, the sellers party thereto, respectively, and in the Allentown Acquisition Agreement made by Borrower and, to the best of Borrower's knowledge after due inquiry, the sellers party thereto, respectively, are, in each case, true and correct in all material respects as of the time such representations and warranties were made and shall be true and correct in all material respects as of the Closing Date as if such representations and warranties were made on and as of such date, unless such representations and warranty expressly indicates that it is being made as of any other specific date. 8.08. ERISA AND FOREIGN EMPLOYEE BENEFIT MATTERS. No ERISA Event has occurred or is reasonably expected to occur. The present value of all accumulated benefit obligations of all underfunded Pension Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $1.0 million the fair market value of the assets of all such underfunded Pension Plans. Each ERISA Entity is in compliance in all material respects with the presently applicable provisions of ERISA and the Code with respect to each Employee Benefit Plan. Using actuarial assumptions and computation methods consistent with subpart 1 of subtitle E of Title IV of ERISA, the aggregate liabilities or any of each ERISA Entity to all Multiemployer Plans in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Multiemployer Plan, would not reasonably be expected to result in a Material Adverse Effect. No Company or any ERISA Entity maintains or has contributed to a Foreign Plan. -77- 8.09. TAXES. Except as would not have a Material Adverse Effect, (i) all tax returns, statements, reports and forms (including estimated Tax or information returns) (collectively, the "TAX RETURNS") required to be filed with any taxing authority by, or with respect to, each Company and Holdings have been filed in accordance with all applicable laws; (ii) each Company and Holdings have timely paid or made provision for payment of all Taxes shown as due and payable on Tax Returns that have been so filed, and, as of the time of filing, each Tax Return correctly reflected the facts regarding income, business, assets, operations, activities and the status of each Company and Holdings (other than Taxes which are being contested in good faith and for which adequate reserves are reflected on Borrower's financial statements) and (iii) each Company and Holdings have made provision for all Taxes payable by such Company or Holdings for which no Tax Return has yet been filed. Except as set forth on SCHEDULE 8.09, (i) no extension of a statute of limitations relating to material Taxes is in effect with respect to Holdings or any Company; (ii) no Company or Holdings has ever been a member of an affiliated group of corporations within the meaning of Section 1504 of the Code other than an affiliated group of corporations of which Borrower was the common parent; and (iii) there are no material tax sharing agreements or similar arrangements (including tax indemnity arrangements) with respect to or involving any Company other than between or among Borrower and the Subsidiaries. 8.10. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT; OTHER RESTRICTIONS. Neither Holdings nor any Company is an "investment company", or a company "controlled" by an "investment company", within the meaning of the United States Investment Company Act of 1940, as amended. Neither Holdings nor any Company is a "holding company", or an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company", within the meaning of the United States Public Utility Holding Company Act of 1935, as amended. No Obligor is subject to regulation under any law or regulation which limits its ability to incur Indebtedness, other than Regulation X of the Board of Governors of the Federal Reserve System. 8.11. ENVIRONMENTAL MATTERS. Except as disclosed in SCHEDULE 8.11 and except as would not, individually or in the aggregate, result in a Material Adverse Effect: (i) each Company and Holdings are in compliance with, and are not subject to liability under, any applicable Environmental Laws and to the best knowledge of the Obligors, there are no Environmental Laws, including such Laws which have been formally proposed for public comment, which could reasonably be expected to result in material expenditures by any Company or Holdings or to interfere in any material way with current or projected operations of any Company; (ii) neither Holdings nor any Company, or to the knowledge of the Obligors, any of their predecessors in interest, has disposed of, arranged for the disposal or treatment of, or otherwise released Hazardous Materials at any site with respect to which Holdings or any Company has received an Environmental Claim; (iii) to the best knowledge of the Obligors, no Real Property now or formerly owned, leased or operated by Holdings or any Company or any of their respective predecessors in interest, is listed or proposed for listing on the National Priorities List under the United States Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA") included on any similar lists maintained by any Governmental Authority; (iv) to the best knowledge of the Obligors, there are no past or present events, conditions, activities, practices or actions, or any agreements, judgments, decrees or orders by which Holdings or any Company is bound, which would reasonably be expected to prevent Holdings' or any Company's compliance with any Environmental Law, or which would reasonably be expected to give -78- rise to any liability of any Company under any Environmental Law; and (v) neither Holdings nor any Company is subject to any Proceeding alleging the violation of, or liability under, any Environmental Law or has received any Environmental Claim and, to the knowledge of the Obligors, no such Proceeding or Environmental Claim is threatened. 8.12. ENVIRONMENTAL INVESTIGATIONS. As of the Closing Date, all material environmental investigations, studies, audits or assessments in the possession, custody or control of Holdings or any Company relating (i) to the current or prior business or operations of Holdings or any Company or any of their respective predecessors in interest or (ii) to any Property now or previously owned, operated, leased or used by Holdings or any Company or any of their respective predecessors in interest have been made available to the Creditors. 8.13. USE OF PROCEEDS. Neither Holdings nor any Company is engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying Margin Stock and no part of the proceeds of any extension of credit hereunder will be used directly or indirectly and whether immediately, incidentally or ultimately to purchase or carry any Margin Stock or to extend credit to others for such purpose or to refund Indebtedness originally incurred for such purpose. Following application of the proceeds of each extension of credit hereunder, not more than 25 percent of the value of the assets (either of Borrower individually or of Consolidated Companies) will be Margin Stock. If requested by any Creditor, Borrower will furnish to Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form U-1 referred to in Regulation U. Borrower will use the proceeds of (i) all Term Loans to finance the Transactions and pay related fees and expenses and (ii) Revolving Loans to finance the Transactions (in an amount not to exceed on the Closing Date $6.9 million unless consented to by Lead Arranger in its sole discretion), pay fees and expenses related thereto, and for general corporate purposes. 8.14. SUBSIDIARIES, ETC. As of the Closing Date, Borrower has no Subsidiaries or interests (whether direct or indirect) in partnerships, Minority Interests or business trusts other than the entities set forth on SCHEDULE 8.14. Each Subsidiary listed on SCHEDULE 8.14 (other than each Foreign Subsidiary) will be a Guarantor as of the Closing Date. Borrower owns, as of the Closing Date, the percentage of the issued and outstanding Equity Interests or other evidences of the ownership of each of its Subsidiaries, partnerships or Minority Interests listed on SCHEDULE 8.14 as set forth on such Schedule. No such Subsidiary, partnership or Minority Interest has issued any securities convertible into its Equity Interests (or other evidence of ownership) or any Equity Rights to acquire such Equity Interests, and the outstanding Equity Interests of such Subsidiaries, partnerships or Minority Interests are owned by Borrower free and clear of all Liens and Equity Rights of others of any kind whatsoever, except for Liens pursuant to the Security Documents and Liens thereon permitted by Section 9.07. 8.15. OWNERSHIP OF PROPERTY; LIENS. Except as set forth on SCHEDULE 8.15, each of Holdings and the Companies has good and marketable title to all of the assets and Property (tangible and intangible) owned by it (except insofar as marketability may be limited by any laws or regulations of any Governmental Authority affecting such assets), and all such assets and Property are free and clear of all Liens except Permitted Liens and Prior Liens. Substantially all of the assets and Property owned by, leased to, or used by Holdings and each Company in their respective businesses is in adequate operating condition and repair, ordinary wear and tear excepted, is free and clear of any known -79- defects except such defects as do not substantially interfere with the continued use thereof in the conduct of normal operations, and is able to serve the function for which they are currently being used, except in each case where the failure of such asset to meet such requirements would not, or is not reasonably likely to, result in a Material Adverse Effect. Neither any Credit Document, nor any transaction contemplated under any such document, will affect any right, title or interest of Holdings or any Company in any of such assets in a manner that would, or is reasonably likely to, result in a Material Adverse Effect. 8.16. SECURITY INTEREST; ABSENCE OF FINANCING STATEMENTS; ETC. The Security Documents, once executed and delivered, will create, in favor of Administrative Agent for the benefit of the Creditors, as security for the obligations purported to be secured thereby, a valid and enforceable, and upon filing or recording with the appropriate Governmental Authorities and delivery of the applicable documents to Administrative Agent, perfected security interest in and Lien upon all of the Collateral (and the proceeds thereof), superior to and prior to the rights of all third persons other than the holders of Prior Liens and subject to no other Liens except as expressly permitted by the Security Documents. Except as set forth on SCHEDULE 8.16 and except for (i) in the case of Collateral, Liens expressly permitted by the Security Documents, (ii) in the case of all other Property, Permitted Liens and (iii) the Liens created by the Security Documents, there is no currently effective financing statement, security agreement, chattel mortgage, real estate mortgage or other document filed or recorded with any filing records, registry, or other public office, that purports to cover, affect or give notice of any Lien on, or security interest in, any Property of Holdings or any Company or rights thereunder. 8.17. LICENSES AND PERMITS. Holdings and the Companies hold all governmental permits, licenses, authorizations, consents and approvals necessary for Holdings and the Companies to own, lease, and operate their respective Properties and to operate their respective businesses as now being conducted (collectively, the "PERMITS"), except for Permits the failure of which to obtain would not have a Material Adverse Effect. None of the Permits has been modified in any way that is reasonably likely to have a Material Adverse Effect. All Permits are in full force and effect except where the failure to be in full force and effect would not reasonably be expected to have a Material Adverse Effect. 8.18. TRUE AND COMPLETE DISCLOSURE; EXCHANGE ACT FILINGS. The information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of any Obligor to Lead Arranger or any Lender in connection with the negotiation, preparation or delivery of the Credit Documents or included or delivered pursuant thereto or pursuant to the Confidential Information Memorandum dated March 2000 distributed in connection with the syndication of the Commitments and Loans, including all filings made with the Commission by any Company, and the Credit Documents themselves, but in each case excluding all projections, whether prior to or after the date of this Agreement, when taken as a whole, do not, as of the date such information was furnished, contain any untrue statement of material fact or omit to state a material fact necessary in order to make the statements herein or therein, in light of the circumstances under which they were made, not materially misleading. The projections and pro forma financial information furnished at any time by any Obligor to any Creditor pursuant to this Agreement have been prepared in good faith based on assumptions believed by Borrower to be reasonable at the time made, it being recognized by the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual results -80- during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount and no Obligor, however, makes any representation as to the ability of any Company to achieve the results set forth in any such projections. Each Obligor understands that all such statements, representations and warranties shall be deemed to have been relied upon by the Lenders as a material inducement to make each extension of credit hereunder. 8.19. SOLVENCY. As of each Funding Date immediately prior to and immediately following the consummation of the Transactions and the extensions of credit to occur on such date each Obligor (on a consolidated basis with its Subsidiaries) is and will be Solvent (after giving effect to Section 6.08). 8.20. CONTRACTS. Neither Holdings nor any Company is in default under any material contract or agreement to which it is a party or by which it is bound, nor, to Borrower's knowledge, does any condition exist that, with notice or lapse of time or both, would constitute such default, excluding in any case such defaults that are not reasonably likely to have a Material Adverse Effect. 8.21. LABOR MATTERS. Except as set forth in SCHEDULE 8.21, there is (i) no unfair labor practice complaint pending against Holdings or any Company or, to the best knowledge of Borrower, threatened against Holdings or any Company, before the National Labor Relations Board or any other Governmental Authority, and no grievance or arbitration proceeding arising out of or under any collective bargaining agreement is so pending against Holdings or any Company or, to the best knowledge of Borrower after due inquiry, threatened against Holdings or any Company, (ii) no strike, labor dispute, slowdown or stoppage pending against any Holdings or Company or, to the best knowledge of Borrower, after due inquiry, threatened against Holdings or any Company and (iii) to the best knowledge of Borrower after due inquiry, no union representation question existing with respect to the employees of Holdings or any Company and, to the best knowledge of Borrower, no union organizing activities are taking place, except such as would not, with respect to any matter specified in clause (i), (ii) or (iii) above, individually or in the aggregate, have a Material Adverse Effect. 8.22. SUBORDINATED DEBT. The Obligations are senior debt with respect to all Subordinated Debt of each Obligor and entitled to the full benefits of all subordination provisions therein and such subordination provisions are in full force and effect. 8.23. INTELLECTUAL PROPERTY. To the best knowledge of Borrower after due inquiry, each of Holdings and the Companies owns or possesses adequate licenses or otherwise has the right to use all of the patents, patent applications, trademarks, trademark applications, service marks, service mark applications, trade names, copyrights, trade secrets, know-how and processes (collectively, "INTELLECTUAL PROPERTY") that are necessary for the operation of its business as presently conducted, except where the failure to so own or possess such Intellectual Property would not, individually or in the aggregate, have a Material Adverse Effect. Except as set forth on SCHEDULE 8.23, to the best knowledge of Borrower, no claim is pending that Holdings or any Company infringes upon the asserted rights of any other Person under any Intellectual Property, except for any such claim that would not, individually or in the aggregate, have a Material Adverse Effect. Except as set forth on SCHEDULE 8.23, to the best knowledge of Borrower, no claim is pending that any such Intellectual Property owned or licensed by Holdings or any Company or which Holdings or any Company otherwise has the right to -81- use is invalid or unenforceable, except for any such claim which would not, individually or in the aggregate, have a Material Adverse Effect. Except as set forth in SCHEDULE 8.23, each of Holdings and the Company owns or has the right to use all Intellectual Property listed in SCHEDULE 8.23 and the consummation of the transactions contemplated hereby will not, alter or impair any such rights in a way that would, individually or in the aggregate, have a Material Adverse Effect. Subject to the rights of third parties set forth in SCHEDULE 8.23, all Intellectual Property owned by Holdings or any Company listed in SCHEDULE 8.23 is free and clear of all Liens except Permitted Liens. 8.24. EXISTING INDEBTEDNESS. SCHEDULE 8.24(A) sets forth a true and complete list of all Indebtedness of Holdings and the Companies as of the Closing Date and SCHEDULE 8.24(B) sets forth a true and complete list of all Indebtedness of the Companies that is to remain outstanding after the Closing Date (excluding the Obligations hereunder), in each case showing the aggregate principal amount thereof and the name of each respective borrower and any other entity that directly or indirectly guaranteed such Indebtedness. 8.25. FCC MATTERS. (a) BORROWER STATIONS. (i) Schedule 8.25(a) hereto contains a complete list of the FCC Authorizations of the Companies. Such list correctly sets forth the termination date of each such FCC Authorization. Each such FCC Authorization that is material to the operation of the business of any Borrower Station is validly issued and in full force and effect, and constitutes in all material respects, all of the authorizations from the FCC necessary under the Communications Act for the operation of Borrower's business (including, without limitation, the Borrower Stations) in the same manner as it is presently conducted and as proposed to be conducted. Borrower has taken all actions and performed all of its obligations that are necessary to maintain such FCC Authorizations for the Borrower Stations without adverse modification or impairment, and complete and correct copies of the FCC Authorizations of each Borrower Station have been delivered to Agent and Lenders. Except as expressly set forth on Schedule 8.25(a), no event has occurred which (i) results in, or after notice or lapse of time or both would result in, revocation, suspension, adverse modification, non renewal, impairment or termination of or any order of forfeiture with respect to, any FCC Authorization for a Borrower Station, or (ii) materially and adversely affects or in the future may (so far as Borrower can now reasonably foresee) materially adversely affect any of the rights of Borrower thereunder. No condition has been imposed by the FCC as part of any of the FCC Authorizations, which is not set forth on the face thereof as issued by the FCC or contained in the rules and regulations of the FCC applicable generally to the stations of the type of the Borrower Stations. (ii) Except as expressly set forth in Schedule 8.25(a), Borrower is not a party to and has no knowledge of any investigation, notice of apparent liability, violation, forfeiture or other order or complaint issued by or before any court or regulatory body, including the FCC, or of any other proceedings (other than proceedings relation to the radio industry generally) which would reasonably be expected to in any manner threaten or adversely affect the validity or continued effectiveness of the FCC Authorizations for any Borrower Station. Borrower has no reason to believe (other than there -82- being no legal assurance thereof) that the FCC Authorizations for the Borrower Stations listed and described in Schedule 8.25(a) will not be renewed in the ordinary course. Borrower has filed in a timely manner all material reports (including, but not limited to, ownership reports), applications, documents, instruments and information required to be filed by it pursuant to applicable rules and regulations or requests of every regulatory body having jurisdiction over any of its FCC Authorizations for a Borrower Station. (iii) Except as expressly set forth in Schedule 8.25(a) to the best of Borrower's knowledge after due inquiry, none of the facilities used in connection with Borrower's radio broadcasting operations (including without limitation, the transmitter and tower sites owned or used by Borrower in connection with the operation of the Borrower Stations) violates in any material respect the provisions of any applicable building codes, fire regulations, building restrictions or other governmental ordinances, orders, or regulations and each such facility is zoned so as to permit the commercial uses intended by the owner or occupier thereof and there are no outstanding variances or special use permits materially affecting any of the facilities or the uses thereof. (iv) Borrower has duly and timely filed all material filings which are required to be filed by it under the Communications Act. (v) The execution, delivery and performance of the Credit Documents by the Obligors do not require the approval of the FCC. The execution, delivery and performance of the Credit Documents will not result in any violation of the Communications Act, and will not cause any forfeiture or impairment of any of the FCC Authorizations issued for the operation of any of the Borrower Stations. (b) LMA STATIONS. (i) The Time Brokerage Agreements are in full force and effect and are in compliance in all material respects with the Communications Act. (ii) To the best of Borrower's knowledge after due inquiry: Schedule 8.25(b) hereto contains a complete listing of all FCC Authorizations held by each LMA Licensee for its LMA Stations; these FCC Authorizations constitute all licenses, construction permits, and authorizations required under the Communications Act to permit each LMA Licensee to own, control, manage and operate its LMA Stations as they are currently being owned, controlled, managed and operated; Schedule 8.25(b) correctly sets forth the termination date of each such FCC Authorization; each such FCC Authorization that is materially necessary to the operation of the business of each LMA Licensee is validly issued and in full force and effect, and constitutes in all material respects, all of the authorizations from the FCC necessary for the operation of the LMA Licensee's business with respect to its LMA Stations in the same manner as they presently are being conducted and as they are proposed to the conducted; each LMA Licensee has taken all actions and performed all of its obligations that are necessary to maintain such FCC Authorizations without adverse modification or impairment, and complete and correct copies of the FCC Authorizations of each LMA Licensee have been delivered to Agent and Lenders; except as expressly set forth on Schedule 8.25(b), no event has occurred which (i) results in, or after notice or lapse of time or both would result in, revocation, suspension, adverse modification, non renewal, impairment or termination of or any order of forfeiture with respect to, any -83- FCC Authorization for any LMA Station or (ii) materially and adversely affects or in the future may (so far as now can reasonably be foreseen) materially adversely affect any of the rights of any LMA Licensee thereunder, and no condition has been imposed by the FCC as part of any of the FCC Authorizations for any LMA Station, or on the grant of the renewal for such FCC Authorizations, which is not set forth on the face thereof as issued by the FCC or contained in the rules and regulations of the FCC applicable generally to stations of the type, nature, class or location of the LMA Stations. (iii) To the best of Borrower's knowledge after due inquiry: except as expressly set forth in Schedule 8.25(b), no LMA Licensee is a party to any investigation, notice of apparent liability, violation, forfeiture or other order or complaint issued by or before any court or regulatory body, including the FCC, or of any other proceedings (other than proceedings relating to the radio industry generally) which could in any manner threaten or adversely affect the validity or continued effectiveness or its FCC Authorizations; the FCC has granted renewals of the FCC Authorizations for each LMA Station in the ordinary course; and each LMA Licensee has filed in a timely manner all material reports, applications, documents, instruments and information required to be filed by it pursuant to applicable rules and regulations or requests of every regulatory body having jurisdiction over any of its FCC Authorizations. (vi) To the best of Borrower's knowledge after due inquiry: except as expressly set forth in Schedule 8.25(b), none of the facilites used in connection with any LMA Licensee's radio broadcasting operations that such LMA Licensee owns or uses in connection with the operation of its LMA Station, violates in any material respect the provisions of any applicable building codes, fire regulations, building restrictions or other governmental ordinances, orders, or regulations and each such facility is zoned so as to permit the commercial uses intended by the owner or occupier thereof and there are no outstanding variances or special use permits materially affecting any of the facilities or the uses thereof. (v) To the best of Borrower's knowledge after due inquiry: each Ownership Report filed by each LMA Licensee with the FCC is true, correct and complete in all material respects and there have been no changes in such LMA Licensee's ownership since the filing of the most recent Ownership Reports for the LMA Stations of such LMA Licensee. (vi) To the best of Borrower's knowledge after due inquiry: the execution, delivery and performance of the Credit Documents in accordance with their terms will not result in any violation of the Communications Act, and will not cause any forfeiture or impairment of any of the FCC Authorizations issued for the operation of any LMA Station. Section 9. COVENANTS. Each Obligor, for itself and on behalf of its Subsidiaries, covenants and agrees with the Creditors that, so long as any Commitment, Loan or L/C Liability is outstanding and until payment in full of all amounts payable by Borrower hereunder (and each Obligor covenants and agrees that it will cause its Subsidiaries to observe and perform the covenants herein set forth applicable to any such Subsidiary): 9.01. FINANCIAL STATEMENTS, ETC. Borrower shall deliver to Administrative Agent and each of the Lenders: -84- (a) QUARTERLY FINANCIALS. As soon as available and in any event within 45 days after the end of each of the first three quarterly fiscal periods of each fiscal year beginning with the fiscal quarter ending March 31, 2000, consolidated statements of operations, cash flows and (if applicable) stockholders' equity of Consolidated Companies for such period and for the period from the beginning of the respective fiscal year to the end of such period, and the related consolidated balance sheet of Consolidated Companies as at the end of such period, setting forth in each case in comparative form (i) the corresponding consolidated statements of operations, cash flows and stockholders' equity for the corresponding period in the preceding fiscal year to the extent such financial statements are available and (ii) the corresponding budget or plan for such period, accompanied by a certificate of a Responsible Officer of Borrower, which certificate shall state that said consolidated financial statements fairly present in all material respects the consolidated financial condition, results of operations and cash flows of Consolidated Companies in accordance with GAAP, consistently applied, as at the end of, and for, such period (subject to normal year-end audit adjustments and except for the absence of footnotes); (b) ANNUAL FINANCIALS. As soon as available and in any event within 110 days after the end of each fiscal year beginning with the fiscal year ending December 31, 2000, consolidated and consolidating statements of operations, cash flows and (if applicable) stockholders' equity of Consolidated Companies for such year and the related consolidated and consolidating balance sheet of Consolidated Companies as at the end of such year, setting forth in each case in comparative form (i) the corresponding consolidated and consolidating information as of the end of and for the preceding fiscal year to the extent such financial statements are available and (ii) the corresponding budget or plan for such period, and, in the case of such consolidated financial statements, accompanied by an opinion, without a going concern or similar qualification or exception as to scope or other material qualification or exception, thereon of Grant Thornton LLP or other independent certified public accountants of recognized national standing reasonably acceptable to Lead Arranger and the Majority Lenders, which opinion shall state that said consolidated financial statements fairly present in all material respects the consolidated financial condition, results of operations and cash flows of Consolidated Companies as at the end of, and for, such fiscal year in conformity with GAAP, consistently applied; Borrower shall supply such additional information and detail as to any item or items contained on any such statement that Lenders may reasonably require; all such information will be prepared in conformity with GAAP consistently applied; (c) AUDITOR'S CERTIFICATE; COMPLIANCE CERTIFICATE. (i) concurrently with the delivery of the financial statements referred to in Section 9.01(b), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Event of Default relating to the Financial Maintenance Covenants, except as specified in such certificate; and (ii) at the time it furnishes each set of financial statements pursuant to paragraph (a) or (b) above, (1) a certificate of a Responsible Officer of Borrower (I) to the effect that no Default has occurred and is continuing (or, if any Default has -85- occurred and is continuing, describing the same in reasonable detail and describing the action that the Companies have taken and proposes to take with respect thereto) and (II) setting forth in reasonable detail the computations necessary to determine whether each Company is in compliance with Section 9.11 as of the end of the respective quarterly fiscal period or fiscal year, and (2) to the extent not previously disclosed to Administrative Agent, a listing of any state within the United States where any Obligor keeps inventory or equipment and of any material licenses arising under the laws of the United States (or any jurisdiction therein) acquired by any Obligor since the date of the most recent list delivered pursuant to this clause (2) (or, in the case of the first such list so delivered, since the Closing Date); (d) OTHER FINANCIAL INFORMATION. Promptly (A) upon delivery thereof to the holders of any debt securities or the equity holders of Holdings or any Company generally, copies of all financial statements and reports and proxy statements so delivered, and at the time the same are filed, copies of all financial statements and reports which Borrower may make to or file with the Commission or any successor or analogous Governmental Authority and (B) upon delivery to any Company, copies of all financial statements or other financial information provided by Aurora, the sellers of the Allentown Assets or any of their respective Affiliates since the Closing Date pursuant to the Aurora Acquisition Agreement or the Allentown Acquisition Agreement; (e) INTEREST RATE CERTIFICATES. From and after the Trigger Date, together with the financial statements delivered pursuant to clause (a) or (b) of this Section 9.01, an Interest Rate Certificate; (f) NOTICE OF DEFAULT. Promptly after any Company knows or has reason to believe that any Default has occurred or that any Company is in breach or violation of any material term or provision of any material Contractual Obligation, a notice of such Default, breach or violation describing the same in reasonable detail and a description of the action that the Companies have taken and propose to take with respect thereto; (g) ENVIRONMENTAL MATTERS. Written notice of any Environmental Claim materially affecting any Company, any Mortgaged Real Property or the operations of any Company and any notice from any Person of (i) the occurrence of any material release, spill or discharge of any Hazardous Material, (ii) the commencement of any material clean-up pursuant to or in accordance with any Environmental Law of any Hazardous Material at, on, under or within the Mortgaged Real Property or any part thereof, (iii) any matters relating to Hazardous Materials or Environmental Laws that may impair, or threaten to impair, Lenders' security interest in the Mortgaged Real Property or any Obligor's ability to perform any of its obligations under this Agreement when such performance is due or (iv) any other environmental condition, circumstance, occurrence or event which is reasonably likely to have a Material Adverse Effect; (h) AUDITORS' REPORTS. Promptly upon receipt thereof, copies of all annual, interim or special reports issued to any Company by independent certified public accountants in connection with each annual, interim or special audit of such Company's books made by such ac- -86- countants, including any management letter commenting on any Company's internal controls issued by such accountants to management in connection with their annual audit; (i) ANNUAL BUDGETS. As soon as practicable and in any event within 60 days after the beginning of each fiscal year of Borrower beginning January 1, 2001, a consolidated plan and financial forecast for such fiscal year, including a forecasted consolidated balance sheet and forecasted consolidated statements of income and cash flows of the Companies for such fiscal year and for each quarter of such fiscal year, together with an Officers' Certificate demonstrating pro forma compliance for such fiscal year with Section 9.11 and an explanation of the assumptions on which such forecasts are based and stating that such plan and projections have been prepared using assumptions believed in good faith by management of Borrower to be reasonable at the time made; (j) LIEN MATTERS; CASUALTY AND DAMAGE TO COLLATERAL. Prompt written notice of (i) the incurrence of any Lien not expressly permitted by the applicable Security Document on, or claim asserted against any of the Collateral, (ii) any Casualty Event or other insured damage to any material portion of the Collateral or the commencement of any Proceeding likely to result in a Casualty Event or (iii) the occurrence of any other event which in the Borrower's judgment is reasonably likely to materially adversely affect the aggregate value of the Collateral; (k) NOTICE OF MATERIAL ADVERSE EFFECT. Written notice of the occurrence of any Material Adverse Effect or any event or condition which is reasonably likely to result in any Material Adverse Effect; (l) GOVERNMENTAL FILINGS AND NOTICES. Promptly upon request by Administrative Agent, copies of any other material reports or documents that were filed by any Company with any Governmental Authority and copies of any and all material notices and other material communications from any Governmental Authority with respect to any Company; (m) ERISA INFORMATION. Promptly upon the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could result in liability to the Companies in an aggregate amount exceeding $1.0 million, a written notice specifying the nature thereof, what action the Companies or other ERISA Entity have taken, are taking or propose to take with respect thereto, and, when known, any action taken or threatened by the Internal Revenue Service, Department of Labor, PBGC or Multiemployer Plan sponsor with respect thereto; (n) ERISA FILINGS, ETC. Upon request by Administrative Agent, copies of: (i) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by any Company or ERISA Entity with the Internal Revenue Service with respect to each Pension Plan; (ii) the most recent actuarial valuation report for each Pension Plan; (iii) all notices received by any Company or ERISA Entity from a Multiemployer Plan sponsor or any governmental agency concerning an ERISA Event; and (iv) such other documents or governmental reports or filings relating to any Employee Benefit Plan as Administrative Agent shall reasonably request; and -87- (o) FCC NOTICES. Promptly upon any officer or representative of any Company or LMA Licensee receiving any notice from the FCC relating to the Stations copies of such notice. (p) MISCELLANEOUS. Promptly, such financial and other information with respect to any Company as the Administrative Agent on behalf of any Lender may from time to time reasonably request. 9.02. LITIGATION, ETC. Borrower shall promptly give to Administrative Agent and each Lender notice of all Proceedings, and (except to the extent that any such notice would, in the reasonable opinion of Borrower, waive attorney client privilege) any material development thereof, affecting any Company, except Proceedings which would not have a Material Adverse Effect. 9.03. EXISTENCE; COMPLIANCE WITH LAW; PAYMENT OF TAXES; INSPECTION RIGHTS; PERFORMANCE OF OBLIGATIONS; ETC. Each of the Companies and Holdings shall (i) preserve and maintain its legal existence and all of its material rights, privileges and franchises; PROVIDED, HOWEVER, that nothing in this Section 9.03 shall prohibit any transaction expressly permitted under Section 9.06 or the conversion of Holdings into a subchapter "C" corporation; (ii) except as would not have a Material Adverse Effect, comply with all Requirements of Law; (iii) timely file true, accurate and complete tax returns required by all Governmental Authorities and pay and discharge all Taxes imposed upon it or any of its Properties prior to the date on which any penalties attach thereto (except for any such Tax the payment of which is being contested in good faith and by proper proceedings diligently instituted and conducted and against which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP); PROVIDED, that Borrower will not, and will not permit any of its Subsidiaries to, file or consent to the filing of any consolidated income tax return with any Person other than its Subsidiaries; (iv) maintain all of its Properties used or useful in its business in good working order and condition, ordinary wear and tear excepted, except to the extent that the failure to do so would not have a Material Adverse Effect; (v) permit representatives of any Lender during normal business hours and, except during the existence of any Event of Default, upon reasonable prior notice, to examine, copy and make extracts from its books and records, to inspect its Properties, and to discuss its business and affairs with its officers and employees, all to the extent reasonably requested by such Lender; (vi) upon reasonable notice, allow (with the presence of Borrower if Borrower so elects to participate) Lead Arranger or any representative chosen by the Majority Lenders to consult with Borrower's independent public accountants and auditors with respect to the financial affairs of the Companies and authorize such accountants to disclose to Lead Arranger or any representative chosen by the Majority Lenders and the Lenders (and Lead Arranger to the Lenders) any and all financial statements and other supporting financial documents and schedules including copies of any management letter with respect to the business, financial condition and other affairs of the Companies; at the request of Lead Arranger or any representative chosen by the Majority Lenders, Borrower shall deliver a letter addressed to such accountants instructing them to comply with the provisions of this Section 9.03(vi); (vii) perform in all material respects all of its Contractual Obligations, except where such failure to so perform, singly or in the aggregate with all other such failures, would not have a Material Adverse Effect; (viii) pay all claims (including, without limitation, claims for labor, services, materials and supplies) for sums which have become due and payable and which by law have or may become a Lien (other than a Lien permitted under Section 9.07) upon any Property of any Company, prior to the time when any penalty or fine shall be incurred with respect thereto; PROVIDED, HOWEVER, -88- that no claims referred to in this clause (viii) need be paid if being contested in good faith by appropriate proceedings diligently instituted and conducted and if such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; and (ix) keep proper books of record and accounts, in which full and correct entries shall be made of all financial transactions and the Property and business of each Company in accordance with GAAP. 9.04. INSURANCE. (A) Each of the Companies and Holdings shall maintain in full force and effect the insurance policies and programs listed on SCHEDULE 9.04 or substantially similar policies and programs or other policies and programs as are reasonably acceptable to Administrative Agent. All such policies and programs shall be maintained with responsible and reputable insurers of companies engaged in similar businesses and owning similar property in the same general geographic areas in which such Company, as applicable, operates. (B) All policies of insurance required to be maintained by any Company or Holdings must name Administrative Agent on behalf of the Creditors, as mortgagee or loss payee (in the case of property insurance and business interruption insurance) or additional insured (in the case of liability insurance), as applicable, or certificate holder (in the case of workers' compensation insurance) and must provide that no cancellation, non-renewal or modification (including reduced coverage) of the policies will be made without thirty days' prior written notice by the applicable insurance carriers to Administrative Agent and if the insurance carrier shall have received written notice from Administrative Agent of the occurrence and continuance of an Event of Default, the insurance carrier shall pay all proceeds otherwise payable to any Company or Holdings under such policies directly to Administrative Agent. No act, whether willful or negligent, or Default of any Company or Holdings or any other Person shall affect the right of Administrative Agent to recover under such policy or policies of insurance in case of loss or damage. (C) Borrower shall give prompt written notice of any loss in excess of $5.0 million to the insurance carrier and to Administrative Agent. (D) If at any time the area in which any Mortgaged Real Property is located is designated (i) a "flood hazard area" in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), Borrower shall obtain flood insurance in such total amount as Administrative Agent or the Majority Lenders may from time to time reasonably require (so long as such requirement is reasonably grounded in applicable Requirements of Law), and otherwise comply with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as amended from time to time, or (ii) a "Zone 1" area, Borrower shall obtain earthquake insurance in such total amount as Administrative Agent or the Majority Lenders may reasonably require (so long as such requirement is reasonably grounded in applicable Requirements of Law). (E) The policies for any casualty insurance required hereunder shall either name or contain an endorsement naming the Administrative Agent as first mortgage and loss payee under a first mortgage clause or endorsement without contribution substantially equivalent to the New York standard first mortgage clause of endorsement. (F) Without limiting the obligations of the Companies and Holdings under the foregoing provisions of this Section 9.04, in the event any Company or Holdings shall fail to maintain in -89- full force and effect insurance as required by the foreign provisions of this Section 9.04, then the Administrative Agent may, but shall have no obligation so to do, procure insurance covering the interests of the Lenders and the Administrative Agent in such amounts and against such risks as the Administrative Agent (or the Majority Lenders) shall deem appropriate, and all sums so disbursed by Administrative Agent shall be part of the Obligations, payable as provided in this Agreement. 9.05. LIMITATION ON LINES OF BUSINESS. Neither Holdings nor any Company shall directly or indirectly, engage to any material extent in any line or lines of business activity other than the business of the type conducted by the Companies as of the Closing Date and any other businesses reasonably related thereto. No License Subsidiary shall engage in any business or incur any liabilities other than the ownership of its FCC Authorizations (and the licensing thereof to any Company) and the execution, delivery and performance of the Credit Documents to which it is a party and activities incidental to the foregoing. 9.06. LIMITATION ON FUNDAMENTAL CHANGES, ACQUISITIONS OR DISPOSITIONS. Neither Holdings nor any Company shall, directly or indirectly, in a single transaction or series of transactions, (1) merge, consolidate or amalgamate with or into any Person, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), (2) effect any Acquisition, or (3) effect any Disposition (or agree to do any of the foregoing), EXCEPT that each of the following shall be permitted: (a) purchases and sales of Property and services in the ordinary course of business; (b) the incurrence of (i) with respect to Collateral, any Lien permitted by the Security Documents and (ii) with respect to all other Property, any Permitted Lien; (c) so long as no Default then exists or would arise therefrom, the merger, consolidation, dissolution or liquidation of (1) any Subsidiary with or into (i) Borrower so long as Borrower shall be the continuing or surviving corporation or (ii) any Qualified Subsidiary so long as a Qualified Subsidiary shall be the continuing or surviving corporation, and (2) any Non-Qualified Subsidiary with or into any other Non-Qualified Subsidiary; (d) Dispositions (including the licensing of FCC Authorizations) by any Company to any Qualified Company or by any Non-Qualified Subsidiary to any other Non-Qualified Subsidiary; (e) Dispositions of used, worn out, obsolete or surplus Property by any Company in the ordinary course of business and the abandonment or other Disposition of Intellectual Property that is, in the reasonable judgment of Borrower, no longer economically practicable to maintain or useful in the conduct of the business of the Companies taken as a whole; PROVIDED, HOWEVER, that in each case the net proceeds thereof shall be reinvested in the business of a Company within one year of such Disposition; (f) the sale or discount without recourse of accounts receivable or notes receivable arising in the ordinary course of business, or the conversion or exchange of accounts receivable into or for notes receivable, in connection with the compromise or collection thereof; -90- (g) so long as no Default then exists or would arise therefrom, any Disposition for fair market value (including like-kind exchanges of capital assets) so long as (i) the fair market value of the consideration received from all Dispositions since the Closing Date pursuant to this clause (g) do not exceed $1.0 million, and (ii) to the extent the consideration received consists of cash, the Net Available Proceeds therefrom shall be applied as specified in Section 2.10(a)(iv); (h) Acquisitions by any Qualified Company; PROVIDED, HOWEVER, that each Acquisition under this Section 9.06(h) shall satisfy each of the following conditions: (i) no Default then exists or would arise therefrom; (ii) after giving pro forma effect in accordance with GAAP to such Acquisition, Borrower shall be in compliance with all covenants set forth in Section 9.11 as of the Test Date immediately prior to the consummation thereof (assuming, for purposes of Section 9.11, that such Acquisition, and all other Permitted Acquisitions consummated since the first day of the relevant measurement period for each financial covenant set forth in Section 9.11 ending on or prior to the date of such Acquisition, had occurred on the first day of such relevant measurement period); (iii) the board of directors of the acquired Person shall not have indicated privately at the time of consummation of the Acquisition to any Company or publicly its opposition to the consummation of such Acquisition; (iv) such Acquisition shall be effected through a Qualified Company and the Person or business acquired shall at the time of consummation of such Acquisition be merged or combined or consolidated with or into a Qualified Company (so long as, with respect to Borrower, Borrower is the surviving Company and each other survivor shall be a Qualified Company) or shall be or become at the time of consummation thereof a Qualified Company ; (v) with respect to any Acquisition involving Acquisition Consideration of more than $5.0 million, Borrower shall have provided the Lenders not fewer than 15 days prior to the proposed closing thereof, with (1) written notice thereof and a brief description of the material terms thereof and a brief description of the business or Person to be acquired, (2) historical financial statements for the last three fiscal years (or, if less, for the period of such Person's existence) of the Person or business to be acquired (audited if available without undue cost or delay) and unaudited financial statements thereof for the most recent interim period which are available, (3) copies of all available material documentation pertaining to such Acquisition, (4) reasonably detailed projections pertaining to the Person or business to be acquired through the Final Maturity Date and (5) all such other available information and data relating to such Acquisition or the Person or business to be acquired as may be reasonably requested by Lead Arranger or the Majority Lenders; -91- (vi) the business to be acquired would not subject any Lender to regulatory or third party approvals in connection with the exercise of their rights and remedies under any Credit Documents; (vii) Borrower shall have delivered to Lead Arranger and the Lenders (x) an Officers' Certificate at least 10 days prior to the date of consummation of such Acquisition (but in any event not earlier than a date which would result in the Test Date occurring on or immediately prior to the consummation of such Acquisition being more than 135 days prior to the date of consummation of such Acquisition) certifying that (1) such Acquisition complies with this Section 9.06(h) (which shall have attached thereto reasonably detailed backup data and calculations showing such compliance), and (2) such Acquisition is not reasonably likely to have a Material Adverse Effect and (y) financial statements referred to in clause (v) of this Section 9.06(h) for the most recently ended fiscal period if the latest financial statements previously delivered pursuant to clause (v) cover a period ending more than 135 days before the date of consummation of such Acquisition; and (viii) the Acquisition Consideration for all Acquisitions effected pursuant to this Section 9.06(h) since the Closing Date, shall not exceed $10.0 million (excluding Equity Interests issued to the sellers in connection with such Acquisition); (i) transfers resulting from any Casualty Event; PROVIDED, HOWEVER, that the Net Available Proceeds therefrom shall be applied as specified in Section 2.10(a)(i); (j) licenses or sublicenses by any Company of software, Intellectual Property and general intangible and leases, licenses or subleases of other Property in the ordinary course of business and which do not materially interfere with the business of any Company; (k) any consignment arrangements or similar arrangements for the sale of assets in the ordinary course of business of any Company; (l) the making of Investments permitted by Section 9.09 and the liquidation in the ordinary course of business of (A) Cash Equivalents and (B) Investments made pursuant to clause (a) of the definition of Permitted Investments; (m) the Aurora Acquisition in accordance with the Aurora Acquisition Agreement; (n) the Allentown Acquisition in accordance with the Allentown Acquisition Agreement, PROVIDED, HOWEVER, that Borrower shall have received proceeds from the Allentown Equity Investment from Holdco of at least $27.0 million in cash (or any Equity Issuance effected in lieu thereof); and (o) Acquisitions pursuant to the terms of the LMA Documents. No Company shall effect the Disposition of any Equity Interests of any Subsidiary unless in compliance with the foregoing provisions and unless all Equity Interests of such Subsidiary -92- owned by the Companies are sold pursuant thereto in accordance with the Credit Documents, upon which sale the Guarantee by such Subsidiary shall be automatically deemed to be released. Subject to Section 12.04, and so long as no Default then exists, to the extent the Majority Lenders waive the provisions of this Section 9.06 with respect to the sale or other disposition of any Collateral, or any Collateral is sold or otherwise disposed of as permitted by this Section 9.06 (other than to any Company), such Collateral in each case shall be sold or otherwise disposed of free and clear of the Liens created by the Security Documents and Administrative Agent shall take such actions as are appropriate in connection therewith. 9.07. LIMITATION ON LIENS AND NEGATIVE PLEDGES. Neither Holdings nor any Company shall, directly or indirectly, create, incur, assume or suffer to exist any Lien upon or with respect to any of their respective Property, whether now owned or hereafter acquired, except, with respect to Collateral, for Liens expressly permitted by the applicable Security Document and, with respect to all other Property, EXCEPT for each of the following (which are herein collectively referred to as "PERMITTED LIENS"): (a) Liens (including any Prior Liens) in existence on the Closing Date on Property of any Company and identified in SCHEDULE 9.07 (excluding, however, following the Closing Date, Liens securing the Existing Credit Facilities); (b) Permitted Customary Liens; (c) Liens upon Property acquired after the Closing Date by any Company, which Liens either (A) existed on such Property before the time of its acquisition and was not created in anticipation thereof, or (B) was created solely for the purpose of securing Indebtedness representing, or incurred to finance or refinance, the cost of such Property or improvements thereon; PROVIDED, HOWEVER, that (1) no such Lien shall extend to or cover any Property of any Company other than the Property so acquired and improvements thereon and proceeds thereof, (2) the principal amount of Indebtedness secured by any such Lien shall at no time exceed 100% of the fair market value of such Property at the time it was acquired or constructed and (3) the Indebtedness secured by any such Lien is permitted by Section 9.08(e); (d) Liens existing on any Property at the time such Property is acquired or the owner thereof becomes a Subsidiary or is merged or consolidated with or into a Subsidiary and, in each case, not created in contemplation of or in connection with such event; PROVIDED, HOWEVER, that (1) such Liens do not extend to any other Property of any Company and (2) any Indebtedness secured by any such Lien is permitted by Section 9.08(f); (e) Liens securing obligations under Swap Contracts with any Creditor to the extent such Swap Contract was entered into to hedge interest rates in respect of the Loans and only so long as the Obligations are secured by the same collateral on at least a PARI PASSU basis; (f) Liens securing obligations in respect of Capital Leases solely on Property (including improvements thereto and the proceeds thereof) subject to such Capital Leases (in- -93- cluding Capital Leases resulting from any Sale and Leaseback Transaction permitted by Section 9.06(n)); PROVIDED, HOWEVER, that such Capital Leases are permitted by Section 9.08(e); (g) Liens created under the Credit Documents securing the Obligations; (h) Liens securing Contingent Obligations permitted under clause (e) of the definition of Permitted Obligations not exceeding (as to all of the Companies) $1.0 million in aggregate amount at any time outstanding; (i) Liens not otherwise permitted under this Section 9.07 (on Property other than Collateral) which secure obligations permitted hereunder not exceeding $1.0 million in the aggregate at any one time outstanding; (j) any extension, renewal or replacement of the foregoing; PROVIDED, HOWEVER, that the Liens permitted by this Section 9.07(j) shall not cover any additional principal amount of Indebtedness or Property (other than like Property substituted for Property covered by such Lien). Except with respect to (i) specific Property encumbered pursuant to a Lien permitted to be incurred pursuant to this Section 9.07 or (ii) specific Property to be sold pursuant to any Disposition or Excluded Disposition, no Company will directly or indirectly, enter into or suffer to exist any Contractual Obligation on or after the Closing Date prohibiting or restricting in any manner (directly or indirectly and including by way of covenant, representation or warranty or event of default) the creation or assumption of any Lien upon its Property, whether now owned or hereafter acquired, except pursuant to (1) the Credit Documents, (2) any other agreement that expressly allows and does not restrict in any manner (directly or indirectly) Liens created pursuant to the Credit Documents on Property of any Company (whether now owned or hereafter acquired) securing the Obligations and does not require the direct or indirect granting of any Lien securing any Indebtedness or other obligation by virtue of the granting of Liens on or pledge of Property of any Company to secure the Obligations, (3) any operating leases of Real Property entered into in the ordinary course of business, and (4) customary non-assignment provisions in contracts entered into in the ordinary course of business. 9.08. PROHIBITION ON DISQUALIFIED CAPITAL STOCK; LIMITATION ON INDEBTEDNESS AND CONTINGENT OBLIGATIONS; LIMITATION ON DESIGNATED SENIOR INDEBTEDNESS. (A) Neither Holdings nor any Company shall, directly or indirectly, issue or permit to be outstanding any Disqualified Capital Stock. Neither Holdings nor any Company shall, directly or indirectly, incur or suffer to exist any Indebtedness or any Contingent Obligation, EXCEPT for each of the following: (a) Obligations (including the Guarantees) under the Credit Documents; (b) Indebtedness and Contingent Obligations of any Company owing to or for the benefit of any Qualified Company; PROVIDED, HOWEVER, that (1) such Indebtedness shall be evidenced by an Intercompany Note which shall be pledged to Administrative Agent on behalf of the Creditors pursuant to the Security Agreement, and (2) such Indebtedness and Contingent Obligations shall not be held by any Person other than a Qualified Company and shall not be subordinate to any other Indebtedness or Contingent Obligations or other obligation of -94- the obligor unless also subordinated to the Obligations on terms no less favorable to the Lenders than that of any other creditor; (c) Contingent Obligations of any Qualified Company in respect of Indebtedness or other liabilities of any Qualified Company to the extent that the existence of such Indebtedness or other liabilities is not prohibited under this Agreement and on substantially similar terms as such Indebtedness; (d) Permitted Obligations; (e) Indebtedness and Contingent Obligations of the Companies (including Permitted Refinancings thereof) secured by Liens permitted under Section 9.07(c) or (f) (and extensions, renewals or replacements thereof pursuant to Section 9.07(i)) not exceeding (together with any Permitted Refinancing thereof) $1.0 million in the aggregate at any time outstanding for the Companies collectively; (f) Indebtedness of a Person that becomes a Subsidiary after the Closing Date; PROVIDED, HOWEVER, that (1) such Indebtedness existed at the time such Person became a Subsidiary and was not created in connection with or in anticipation thereof, (2) immediately after giving effect to the acquisition of such Person by Borrower no Default shall have occurred and be continuing, and (3) the aggregate amount of Indebtedness outstanding at any time pursuant to this Section 9.08(f) shall not exceed $1.0 million for all Subsidiaries; (g) so long as no Default exists at the time of incurrence thereof or would arise therefrom, Indebtedness and Contingent Obligations incurred by any Company, and any Permitted Refinancing thereof, not to exceed in the aggregate at any time outstanding $1.0 million in the aggregate for all Companies; (h) Subordinated Debt incurred by Borrower and subordinated guarantees thereof by any Qualified Subsidiary; PROVIDED, HOWEVER, that (i) no Default shall have occurred and be continuing at the time of or would arise from such incurrence, (ii) Borrower would be in compliance with Section 9.11 after giving pro forma effect to the incurrence of such Subordinated Debt, (iii) the maturity of any principal amounts due thereunder shall be no earlier than one year after the final maturity date of the Loans, (ii) the terms and provisions of such Subordinated Debt (including the subordination provisions thereof) are reasonably acceptable to the Lead Arranger; (i) so long as no Default exists at the time of incurrence thereof or would arise therefrom, Guaranty Obligations in respect to third-party loans and advances to directors, officers or employees of any Company and, in the case of loans or advances to finance the purchase of equity interests of Borrower, to the immediate family members or relatives thereof, or trusts or partnerships for the benefit of any of the foregoing, or any of their heirs, executors, or legal representatives, (i) for travel and entertainment expenses incurred in the ordinary course of business, (ii) for relocation expenses incurred in the ordinary course of business or (iii) for any other purpose and, in the case of this clause (iii), in an aggregate principal amount (as to Borrower and all its Subsidiaries), together with the aggregate amount of all Investments per- -95- mitted under Section 9.09(A)(d)(1), of up to $500,000 outstanding at any time, plus the net cash proceeds received by Borrower since the Closing Date from the issuance or sale of Equity Interests of Borrower (including any Equity Rights in respect thereof) to any such Person; (j) the Holdco Notes and other Indebtedness and Contingent Obligations outstanding on the Effective Date and listed in SCHEDULE 8.24(B) as to remain outstanding after the Closing Date (less the aggregate amount of any permanent prepayments or repayments thereof) and Permitted Refinancings thereof; and (k) Contingent Obligations of any Company under Profit Payment Agreements owing to or for the benefit the sellers in connection with any Permitted Acquisition. All intercompany debt shall be unsecured and subordinate in right of payment (to the same extent as the subordination provisions set forth in EXHIBIT B hereto) to the Obligations. Each Obligor, by its execution and delivery of this Agreement, hereby agrees to subordinate its right of payment under any intercompany debt owed to it by any Company to the full and complete payment and performance of the Obligations (provided that scheduled interest and principal payments may be made thereunder so long as no Event of Default has occurred and is continuing). No Obligor shall incur any Subordinated Debt unless otherwise permitted by the foregoing exceptions listed as clauses (a) through (m) above and unless such Subordinated Debt shall be subordinated to the Obligations at least to the same extent and for so long as such Subordinated Debt is subordinated to any other Indebtedness. (B) Neither Holdings nor any Company shall designate, or permit or suffer to exist the designation of, any Indebtedness or other obligation, other than the Obligations, as "Designated Senior Indebtedness," as such term may be defined in any Subordinated Debt, or effect or permit or suffer to exist any comparable designation that confers upon the holders of such Indebtedness or other obligation (or any Person acting on their behalf) the right to initiate payment blockage periods under any Subordinated Debt. 9.09. LIMITATION ON INVESTMENTS; LIMITATION ON CREATION OF SUBSIDIARIES. (A) Neither Holdings nor any Company shall, directly or indirectly, make or permit to remain outstanding any Investments, EXCEPT for each of the following: (a) Permitted Investments and Investments that were Permitted Investments when made; (b) Investments in any Qualified Company or in any Subsidiary if as a result thereof or in connection therewith such Subsidiary becomes a Qualified Subsidiary and Investments by any Non-Qualified Subsidiary in any Company or in any Person not a Subsidiary if as a result thereof or in connection therewith such Person becomes a Subsidiary (provided that no Investment will be permitted in respect of any Subsidiary with respect to which Borrower has not complied with Section 9.20); -96- (c) Investments outstanding on the Closing Date and identified in SCHEDULE 9.09 and, so long as no Default then exists or would arise therefrom, any renewals, amendments and replacements thereof that do not increase the amount thereof; (d) so long as no Default then exists or would arise therefrom, advances, loans or extensions of credit by any Company to (1) officers, directors or employees of any Company and, in the case of loans and advances to finance the acquisition of equity interests of Borrower, to immediate family members or relatives thereof, or trusts or partnerships for the benefit of any of the foregoing, or any of their heirs, executors, or legal representatives, (i) in the ordinary course of business for travel and entertainment or relocation expenses, (ii) existing on the Closing Date and described in Schedule 9.09, (iii) made after the Closing Date for other purposes, not to exceed (as to Borrower and all its Subsidiaries), together with the amount of all Guaranty Obligations permitted pursuant to Section 9.08(i), $1.0 million in the aggregate outstanding at any time, plus the net cash proceeds received by Borrower since the Closing Date from the issuance or sale of Equity Interests of Borrower (including any Equity Rights in respect thereof) to any such Person and (iv) relating to indemnification or reimbursement of any officers, directors or employees in respect of liabilities relating to their serving in any such capacity or as otherwise specified in Section 9.15, and (2) officers, directors or employees of any Company in connection with stock option plans so long as (x) such loans do not involve cash payments by any Company and (y) no Company incurs any obligations at any time to repurchase the stock so purchased; (e) additional Investments in any Non-Qualified Subsidiary to the extent that such Investments reflect an increase in the stockholders' equity of such Subsidiary resulting from retained earnings of such Subsidiary; (f) the ownership of Equity Interests of any Subsidiary existing on the Closing Date or created or acquired thereafter in accordance with the provisions hereof and any additional Equity Interests issued in exchange therefor or as a dividend thereon; (g) Investments consisting of non-cash consideration received in the form of securities, notes or similar obligations in connection with any Disposition (which shall not be subordinated by its terms to any obligations of the issuer thereof); PROVIDED, HOWEVER, that (1) the aggregate amount of such non-cash consideration received in connection with any such Disposition shall not exceed 10% of the total consideration received in connection with such Disposition, (2) such non-cash consideration is pledged pursuant to the appropriate Security Document (other than if received by any Foreign Subsidiary), and (3) the aggregate amount of such Investments made and outstanding at any time shall not exceed $2.0 million (without giving effect to any write-downs or write-offs thereof); (h) so long as no Default then exists or would arise therefrom, Investments consisting of or made in order to consummate Permitted Acquisitions; (i) so long as no Default then exists or would arise therefrom, Investments not otherwise permitted by this Section 9.09 in an aggregate amount outstanding at any time not to ex- -97- ceed $2.0 million for all Companies (plus amounts representing return of capital) (exclusive of any write down or write off thereof). (B) Neither Holdings nor any Company shall, directly or indirectly, create or acquire any Subsidiary without the prior written consent of the Majority Lenders, which consent shall not be unreasonably withheld; PROVIDED, HOWEVER, that (1) the provisions of this Section 9.09(B) shall not require the Majority Lenders' consent for (I) the creation or acquisition of direct or indirect Wholly Owned Subsidiaries so long as Section 9.20 is complied with at the time of formation or acquisition thereof and such creation or acquisition is otherwise permitted under Section 9.09(A) and (II) the creation or acquisition of any Subsidiary which is not a Wholly Owned Subsidiary so long as the Investment made in connection therewith complies with Section 9.09(A) and so long as Section 9.20 is complied with at the time of formation or acquisition thereof; and (2) all Investments in any Subsidiary, including in connection with the creation or acquisition thereof, must comply with Section 9.09(A). 9.10. LIMITATION ON DIVIDEND PAYMENTS. Neither Holdings nor any Company shall, directly or indirectly, declare or make any Dividend Payment at any time, EXCEPT, without duplication: (a) any Subsidiary may declare and make Dividend Payments to Borrower or any Subsidiary and to minority interest holders in such Subsidiary if made on a pro RATA basis to all holders of Equity Interests in such Subsidiary at the same time except that no Qualified Subsidiary may make any Dividend Payment to any Non-Qualified Subsidiary; (b) so long as no Default has occurred and is continuing or would arise therefrom, Borrower may make Dividend Payments to Holdings if the proceeds thereof are used at the time of such Dividend Payment by Holdings (and Holdings may use such Dividend Payments by Borrower as set forth below): (i) to pay management fees and operating and administrative expenses of Holdings that are incurred in the ordinary course of business for the benefit of, or are directly attributable to, Borrower and its Subsidiaries; PROVIDED, HOWEVER, that such Dividend Payments may not exceed $1MM in any fiscal year; (ii) to the extent Holdings is a taxpayer, to pay taxes of the Companies as part of a consolidated, combined or unitary tax filing group or of the separate operations of Holdings which are actually due and payable arising from the ownership of the Equity Interests of Borrower by Holdings (not to exceed in any event the amount of tax that Borrower and the Subsidiaries would otherwise pay if not part of such filing group); (iii) to redeem Equity Interests (other than Disqualified Capital Stock) held by current or former employees, officers or directors of any Company (or their estates or beneficiaries of their estates) upon the death, disability, retirement or termination of employment or directorship, as the case may be, pursuant to any agreement in effect on the Closing Date as in effect on the Closing Date and pursuant to other agreements on substantially similar terms entered into after the Closing Date; PROVIDED, HOWEVER, that the aggregate cash consideration paid, or distributions made, -98- pursuant to this clause (c) (ii) shall not exceed $500,000 in any fiscal year ending after the Closing Date, PLUS, in each case, the proceeds of any Excluded Equity Issuance pursuant to clause (iii) of the definition thereof; (iv) on or after the Holdco Notes Interest Trigger Date, so long as the Total Leverage Ratio after giving effect to such Dividend Payment is less than 5.0:1.0, to pay regularly scheduled interest payments due on the Holdco Notes at the time of such Dividend Payment as set forth in the Holdco Notes Agreement; PROVIDED, HOWEVER, any such Dividend Payments made pursuant to this clause (iv) shall not be made any earlier than the Business Day prior to the due date of such interest. (c) So long as Borrower and Holdings are taxed as a partnership for income tax purposes, Holdings may make distributions to its partners in respect of taxes actually payable by such partners on the income of Borrower, after taking into account all previous tax credits and carryforwards of net operating losses or net capital losses allocable to such partners, in an aggregate amount in respect of any fiscal year not to exceed, in any event, the amount of income tax that Borrower and the Subsidiaries would otherwise pay if they filed their consolidated tax return, and Borrower may make Dividend Payments to Holdings at the time of, and in an amount necessary to permit Holdings to make, such tax distributions; (d) so long as no Default has occurred and is continuing or would arise therefrom, Borrower may make Dividend Payments to Holdings with Excess Qualified Debt Issuance Proceeds, if the proceeds thereof are used at the time of such Dividend Payment by Holdings to repay the Holdco Notes; (e) the application of the Net Cash Proceeds from the offering of the Holdco Notes and borrowings under this Agreement to pay the Initial NH Redemption Payment and the Preferred Return Payments; and (f) so long as no Default has occurred and is continuing or would arise therefrom, Borrower may make Dividend Payments to Holdings, and Holdings may make Dividend Payments from such Dividend Payments, in an amount not to exceed $5.0 million in the aggregate, plus interest accrued at the rate earned by Borrower on Permitted Investments in the form of Cash Equivalents. -99- 9.11. FINANCIAL COVENANTS. (a) MAXIMUM TOTAL LEVERAGE RATIO. The Total Leverage Ratio shall not, as of any Test Date during any period set forth in the table below, exceed the ratio set forth opposite such period in the table below: Period Ratio ------ ----- Closing Date - 6/30/2000 6.50x 7/1/2000 - 9/30/2000 6.25x 10/1/2000 - 12/31/2000 6.00x 1/1/2001 - 3/31/2001 5.75x 4/1/2001 - 6/30/2001 5.50x 7/1/2001 - 9/30/2001 5.25x 10/1/2001 and thereafter 5.00x (b) MINIMUM INTEREST COVERAGE RATIO. The Interest Coverage Ratio shall not, as of any Test Date during any period set forth in the table below, be less than the ratio set forth opposite such period in the table below: Period Ratio ------ ----- Closing Date - 6/30/2000 1.6x 7/1/2000 - 9/30/2000 1.7x 10/1/2000 - 12/31/2000 1.8x 1/1/2001 - 3/31/2001 1.9x 4/1/2001 - 6/30/2001 2.0x 7/1/2001 - 9/30/2001 2.1x 10/1/2001 and thereafter 2.2x -100- (c) MINIMUM FIXED CHARGE COVERAGE RATIO. The Fixed Charge Coverage Ratio shall not, as of any Test Date during any period set forth in the table below, be less than the ratio set forth opposite such period in the table below: Period Ratio ------ ----- Closing Date - 9/30/2001 1.10x 10/1/2001 and thereafter 1.15x (d) MAXIMUM SENIOR LEVERAGE RATIO. The Senior Leverage Ratio shall not, as of any Test Date during any period set forth in the table below, exceed the ratio set forth opposite such period in the table below: Period Ratio ------ ----- Closing Date - 6/30/2000 6.25x 7/1/2000 - 9/30/2000 6.00x 10/1/2000 - 12/31/2000 5.75x 1/1/2001 - 3/31/2001 5.50x 4/1/2001 - 6/30/2001 5.25x 7/1/2001 - 9/30/2001 5.00x 10/1/2001 - 12/31/2001 4.75x 1/1/2002 - 3/31/2002 4.50x 4/1/2002 - 6/30/2002 4.25x 7/1/2002 - 9/30/2002 4.0x 10/1/2002 and thereafter 3.50x (e) LIMITATION ON CAPITAL EXPENDITURES. The aggregate amount of Capital Expenditures made by the Companies in any fiscal year shall not exceed $1,000,000; PROVIDED, HOWEVER, that (x) if the aggregate amount of Capital Expenditures for any fiscal year shall be less than the amount permitted for such fiscal year (before giving effect to any carryover), then the shortfall may be added to the amount of Capital Expenditures permitted for the immediately succeeding (but not any other) -101- fiscal year if the amount expended in such fiscal year would not exceed 150% of the amount permitted for such fiscal year (before any carryover) and (y) in determining whether any amount is available for carryover, the amount expended in any fiscal year shall first be deemed to be from the amount allocated to such year before any carryover. (f) LIMITATION ON OPERATING LEASES. No Company shall permit the aggregate lease payments calculated in accordance with GAAP (including, without limitation, any property taxes paid as additional rent or lease payments) by Companies on a consolidated basis under any agreement to rent or lease any Property (or any extension or renewal thereof) (excluding Capital Leases) to exceed in any fiscal year (commencing with fiscal year 2000) $2.5 million. (g) CALCULATIONS. Solely for purposes of determining compliance with clauses (a)-(d) of this Section 9.11, until the earlier of (x) 180 days after the Closing Date and (y) the termination of the Allentown Acquisition Agreement (in the case of clause (ii) below) or the closing thereof and the termination of the Aurora Acquisition Agreement (in the case of clause (i) below) or the closing thereof, Consolidated EBITDA, Consolidated Interest Expense, Fixed Charges, Senior Debt and Total Debt shall be calculated on a pro forma basis after giving effect to (i) the Aurora Acquisition, the Aurora Debt Repayment and the borrowings under the Term Loan Facilities for financing thereof and (ii) and the Allentown Acquisition. 9.12. EQUAL SECURITY FOR LOANS AND NOTES; PLEDGE OR MORTGAGE OF REAL PROPERTY; LANDLORD CONSENTS. (A) If Holdings or any Company (other than any Foreign Subsidiary) shall acquire any Property after the Closing Date (other than (x) any Property described in Clause (B), (C) or (D) of this Section 9.12 below and (y) any Property subject to a Lien expressly permitted by Section 9.07 and (z) FCC Authorizations) as to which the Administrative Agent, for the benefit of the Lenders, does not have a perfected Lien, promptly (i) execute and deliver to the Administrative Agent such amendments to the Security Documents or such other documents as the Administrative Agent deems necessary or advisable in order to grant to the Administrative Agent, for the benefit of the Lenders, a security interest in such Property and (ii) take all actions necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in such Property, including without limitation, the filing of UCC financing statements in such jurisdictions as may be required by the Security Documents or by law or as may be reasonably requested by the Administrative Agent. (B) If Holdings or any Company (other than any Foreign Subsidiary) shall create or assume any Lien upon any of its Property, now owned or hereafter acquired and whether or not such Property constitutes Collateral, other than any Lien permitted by the Credit Documents, it shall make or cause to be made effective provisions whereby the Obligations will be secured by such Lien equally and ratably with any and all other Indebtedness thereby secured so long as any such Indebtedness shall be secured; PROVIDED, HOWEVER, that this covenant shall not be construed as consent by any Creditor to any violation by any Company of the provisions of Section 9.07. (C) If, after the Closing Date, Holdings or any Company (excluding any Foreign Subsidiary) acquires or holds an interest with a fair market value of $1.0 million or more in any Real Property, such Company shall notify Administrative Agent and, if requested by Majority Lenders or Administrative Agent, (i) take such actions and execute such documents as Administrative Agent or -102- the Majority Lenders shall reasonably require to confirm the Lien of an existing Mortgage, if applicable, or to create a new Mortgage on such additional Real Property and (ii) cause to be delivered to Administrative Agent, on behalf of the Creditors, all documents and instruments reasonably requested by Administrative Agent or as shall be necessary in the opinion of counsel to the Lenders to create a valid perfected first priority mortgage in such Mortgaged Real Property, including, the following: (i) a Mortgage in favor of Administrative Agent, for the benefit of the Creditors, in form for recording in the recording office of each jurisdiction where such Mortgaged Real Property is situated, together with such other documentation as shall be required to create a Lien under applicable law, which Mortgage and other documentation shall be satisfactory to Administrative Agent and shall be effective to create a first priority Lien on such Mortgaged Real Property subject to no Liens other than Prior Liens; (ii) such consents, lien waivers, approvals, estoppels, tenant subordination agreements or other instruments as necessary or as reasonably required by Administrative Agent to grant the Lien contemplated by the Mortgage; and (iii) the following documents and instruments: (1) a Survey of the applicable Mortgaged Property if reasonably practicable; (2) policies or certificates of insurance as required by the applicable Mortgage; (3) judgment, tax and other lien searches in form and substance satisfactory to Administrative Agent; (4) evidence acceptable to Administrative Agent of payment by Borrower of all title insurance premiums (if any), search and examination charges, survey costs, mortgage recording taxes and related charges required for the recording of the applicable Mortgage(s) and issuance of the title insurance policies referred to in this Section 9.12; (5) copies of all material leases applicable thereto in which any Company holds the landlord's interest; (6) an Officers' Certificate that as of the date thereof there (a) has been issued and is in effect, to the extent required, a valid and proper certificate of occupancy of local or foreign equivalent (if any) for the use then being made of such Mortgaged Real Property, (b) has not occurred any uncured material Casualty Event of such Mortgaged Real Property and (c) except as may be disclosed in the Survey of such Mortgaged Real Property delivered pursuant to subclause (iii)(1) of this Section 9.12 above, to the best knowledge of Holdings or the applicable Company which holds an interest in such Mortgaged Real Property, there are no material disputes regarding boundary lines, location, encroachment or possession of such Mortgaged Real -103- Property and no state of facts existing which could reasonably be expected to give rise to any such claim; (7) a policy (or Commitment to issue a policy) of title insurance insuring (or committing to insure) the Lien of such Mortgage as a valid first priority Lien on the Real Property and fixtures described therein in such amount not to exceed 115% of the fair market value thereof as Administrative Agent may reasonably require which policy (or commitment) shall (a) be issued by the Title Company or another title insurance company acceptable to Administrative Agent, (b) include such reinsurance arrangements (with provisions for direct access) as shall be reasonably acceptable to Administrative Agent, (c) have been supplemented by such endorsements (or where such endorsements are not available, opinions of special counsel or other professionals acceptable to Agents) as shall be reasonably requested by Administrative Agent, (d) include such affidavits and instruments of indemnifications by Borrower and the applicable Subsidiary as shall be reasonably required to induce such title insurance company to issue the policy or policies (or commitment) and endorsements contemplated in this paragraph (7), and (e) contain no exceptions to title other than exceptions for Prior Liens; and (8) an opinion of local counsel reasonably acceptable to the Administrative Agent substantially in the form of EXHIBIT E-2. If reasonably requested by Agents or the Majority Lenders, Borrower shall obtain at its sole expense and as soon as practicable but in any event not later than 45 days after request therefor, environmental assessments, including, if necessary, Phase 1 or Phase 2 environmental reports from an environmental engineering firm reasonably acceptable to Lead Arranger with respect to any Real Property held by any Company if not delivered on or prior to the Closing Date. (D) At its own expense, Borrower shall request, and use reasonable efforts to obtain, prior to entering into a lease of a facility in which Inventory will be located on or after the Closing Date, a Landlord Consent, substantially in the form of EXHIBIT K or such other form as may be reasonably satisfactory to Administrative Agent, from each landlord of any such facility. (E) The costs of all actions taken by the parties in connection with this Section 9.12, including reasonable costs of counsel for Administrative Agent, shall be paid by the Obligors promptly following written demand. 9.13. SECURITY INTERESTS; FURTHER ASSURANCES. Each Company and Holdings shall, promptly, upon the reasonable request of Administrative Agent or any Lender, at Borrower's expense, execute, acknowledge and deliver, or cause the execution, acknowledgment and delivery of, and thereafter register, file or record, or cause to be registered, filed or recorded, in an appropriate governmental office, any document or instrument supplemental to or confirmatory of the Security Documents or otherwise deemed by Administrative Agent reasonably necessary or desirable for the continued validity, perfection and priority of the Liens on the Collateral covered thereby superior to and prior to the rights of all third Persons other than the holders of Prior Liens and subject to other Liens except as permitted by the Security Documents, or obtain any consents, including, without limitation, -104- landlord or similar lien waivers and consents, as may be necessary or appropriate in connection therewith. Each Company shall deliver or cause to be delivered to Administrative Agent from time to time such other documentation, consents, authorizations, approvals and orders in form and substance reasonably satisfactory to Administrative Agent as Administrative Agent shall reasonably deem necessary to perfect or maintain the Liens on the Collateral pursuant to the Security Documents. Upon the exercise by Administrative Agent or the Lenders of any power, right, privilege or remedy pursuant to any Credit Document which requires any consent, approval, registration, qualification or authorization of any Governmental Authority, each Company shall execute and deliver all applications, certifications, instruments and other documents and papers that Administrative Agent or the Lenders may be so required to obtain. If Administrative Agent or the Majority Lenders determine that they are required by law or regulation to have appraisals prepared in respect of the Real Property of any Obligor constituting Collateral, Borrower shall provide to Administrative Agent appraisals that satisfy the applicable requirements of the Real Estate Appraisal Reform Amendments of FIRREA and are in form and substance satisfactory to Administrative Agent. 9.14. COMPLIANCE WITH ENVIRONMENTAL LAWS. Each Company and Holdings shall (a) comply with all Environmental Laws, and will keep or cause all Real Property to be kept free of any Liens under Environmental Laws, unless failure to do so would not reasonably be expected to have a Material Adverse Effect; (b) in the event of any Hazardous Material at, on, under or emanating from any Real Property which could result in liability under or a violation of any Environmental Law, in each case which could reasonably be expected to have a Material Adverse Effect, undertake, and/or cause any of their respective tenants or occupants to undertake, at their sole expense, any action required pursuant to Environmental Laws to mitigate and eliminate such condition; provided, HOWEVER, that no Company shall be required to comply with any order or directive which is being contested in good faith and by proper proceedings so long as it has maintained adequate reserves with respect to such compliance to the extent required in accordance with GAAP; (c) promptly notify Administrative Agent of any event specified in clause (b) of this Section 9.14 and periodically thereafter keep Administrative Agent informed of any material actions taken in response to such event and the results thereof; and (d) at the written request of Administrative Agent, provide, at such Company's sole cost and expense, an environmental site assessment (including, without limitation, the results of any groundwater or other testing, conducted at Administrative Agent's request) concerning any Real Property now or hereafter owned, leased or operated by any Company, conducted by an environmental consulting firm proposed by such Obligor and approved by Administrative Agent indicating the presence or absence of Hazardous Materials and the potential cost of any required action in connection with any Hazardous Materials on, at, under or emanating from such Real Property; PROVIDED, HOWEVER, that such request may be made only if (i) there has occurred and is continuing an Event of Default, or (ii) circumstances exist that reasonably could be expected to form the basis of an Environmental Claim against such Company or any such Real Property which would have a Material Adverse Effect; if any Company fails to provide the same within 60 days after such request was made, Administrative Agent may but is under no obligation to conduct the same, and such Company shall grant and hereby grants to Administrative Agent and its agents access to such Real Property and specifically grants Administrative Agent an irrevocable non-exclusive license, subject to the rights of tenants, to undertake such an assessment, all at such Company's sole cost and expense. 9.15. LIMITATION ON TRANSACTIONS WITH AFFILIATES AND RELATED PERSONS. Neither Holdings nor any Company shall, directly or indirectly: enter into or permit to exist any transaction (in- -105- cluding, without limitation, the purchase, sale, lease or exchange of any Property, the rendering of any service, or a merger, Acquisition or other consolidation), with or for the benefit of any Affiliate or any Related Person (an "AFFILIATE TRANSACTION") unless such Affiliate Transaction is (i) otherwise not prohibited under this Agreement, (ii) in the ordinary course of business and (iii) on fair and reasonable terms that are not less favorable to such Company than those that are reasonably obtainable at the time in an arm's-length transaction with a Person that is not such an Affiliate that, EXCEPT that, notwithstanding the foregoing, each of the following shall be permitted: (a) loans or advances to employees permitted by Section 9.09 and Dividend Payments permitted by Section 9.10; (b) fees and compensation paid to, and customary indemnity and reimbursement provided on behalf of, officers, directors and employees of any Company in the ordinary course of business; (c) the transactions and agreements in existence on the Closing Date and listed in SCHEDULE 9.15 (as such agreements are in effect on the Closing Date, the "EXISTING AFFILIATE Agreements") and any amendment thereto that is not disadvantageous to the Lenders in any material respect; (d) any employment agreements entered into by any Company or stock option agreements entered into by Holdings in the ordinary course of business and (e) transactions between or among Borrower and Qualified Subsidiaries. 9.16. LIMITATION ON ACCOUNTING CHANGES; LIMITATION ON INVESTMENT COMPANY STATUS. Neither Holdings nor any Company shall make or permit any change in (i) accounting policies or reporting practices, except immaterial changes and except as required by generally accepted accounting principles or (ii) its fiscal year end (December 31 of each year). No Obligor shall be or become an investment company subject to the registration requirements under the United States Investment Company Act of 1940, as amended. 9.17. LIMITATION ON MODIFICATIONS OF CERTAIN DOCUMENTS, ETC. Neither Holdings nor any Company shall, directly or indirectly, consent to any modification, supplement, waiver of, or termination of, or amend, in any manner which could reasonably be expected to be materially adverse to the Lenders, or result in a Material Adverse Change, any of the provisions of any Organic Document, the Allentown Acquisition Agreement, the Aurora Acquisition Agreement, the LMA Option Agreement (or any agreement entered into in connection therewith), the Equity Commitment Letter and any agreement or document relating to material Indebtedness. 9.18. INTEREST RATE PROTECTION AGREEMENTS. On or within 120 days after the Closing Date, not less than 50% of the aggregate principal amount of then outstanding Total Funded Indebtedness of the Companies shall be either (x) fixed rate debt or (y) debt subject to Interest Rate Protection Agreements such terms and with counterparties reasonably satisfactory to Lead Arranger or (z) any combination of (x) and (y) above. 9.19. LIMITATION ON CERTAIN RESTRICTIONS AFFECTING SUBSIDIARIES. No Company shall, directly or indirectly, create or otherwise cause or suffer to exist or become effective any direct or indirect encumbrance or restriction on the ability of any Subsidiary to (a) pay dividends or make any other distributions on such Subsidiary's Equity Interests or any other interest or participation in its profits owned by any Company, or pay any Indebtedness or any other obligation owed to any Company, (b) make Investments in or to any Company, or (c) transfer any of its Property to any Company, EXCEPT that each of the following shall be permitted (i) any such encumbrances or restrictions existing on the Closing Date and described on SCHEDULE 9.19 or existing under or by reason of (x) applicable Law or (y) the Credit Documents, (ii) restrictions on the transfer of Property subject to a Permitted -106- Lien permitted under Section 9.07, (iii) customary restrictions on subletting or assignment of any lease governing a leasehold interest of any Company, and (iv) restrictions on the transfer of any Property subject to a Disposition permitted under this Agreement and (v) customary non-assignment provisions in contracts entered into in the ordinary course of business. 9.20. ADDITIONAL OBLIGORS. Upon any Company creating or acquiring any Subsidiary after the Closing Date, such Company shall (i) cause each such Subsidiary that is a Wholly Owned Subsidiary (other than any Foreign Subsidiary) to execute and deliver all such agreements, guarantees, documents and certificates (including a Joinder Agreement and any amendments to the Credit Documents) as Administrative Agent or the Majority Lenders may reasonably request and do such other acts and things as Administrative Agent or the Majority Lenders may reasonably request in order to have such Subsidiary become a Guarantor, (ii) promptly, (I) execute and deliver to Administrative Agent such amendments to the Security Documents as Administrative Agent deems necessary or advisable in order to grant to Administrative Agent, for the benefit of the Creditors, a perfected first priority security interest in the Equity Interests and debt securities of such new Subsidiary which are owned by any Company and required to be pledged pursuant to the Security Agreement (it being understood that no Company shall be required to pledge Equity Interests of any Foreign Subsidiary other than Equity Interests which do not comprise more than 65% of the voting Equity Interests of each "first tier" Foreign Subsidiary), (II) deliver to Administrative Agent the certificates representing such Equity Interests and debt securities, together with (A) in the case of such Equity Interests, undated stock powers endorsed in blank, and (B) in the case of such debt securities, endorsed in blank, in each case executed and delivered by a Responsible Officer of Borrower or such Subsidiary, as the case may be, (III) cause such new Subsidiary (other than any Foreign Subsidiary) to take such actions necessary or advisable (including executing and delivering a Joinder Agreement) to grant to Administrative Agent for the benefit of the Creditors a perfected first priority security interest in the collateral described in the Security Agreement with respect to such new Subsidiary, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Security Agreement or by law or as may be reasonably requested by Administrative Agent, and (IV) deliver to Administrative Agent all legal opinions reasonably requested relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to Administrative Agent. The Obligors shall cause all FCC Authorizations of any Company to be held at all times by one or more License Subsidiaries, except that if any Company shall acquire (including by merger) any Person that holds a FCC Authorization, Borrower shall cause such License to be transferred to a License Subsidiary within 90 days of such acquisition. 9.21. LIMITATION ON PAYMENTS OR PREPAYMENTS OF INDEBTEDNESS OR MODIFICATION OF DEBT DOCUMENTS. No Company shall, directly or indirectly make any payment or prepayment (optional or otherwise) on, or redemption of, or any payments in redemption, defeasance or repurchase (whether in cash, securities or other Property) of any Subordinated Debt or any Permitted Refinancing thereof, except (1) regularly scheduled mandatory payments of interest to the extent permitted by the subordination provisions thereof (if any), (2) the conversion or exchange of any Indebtedness into shares of common Equity Interests of Borrower, and (3) pursuant to Permitted Refinancings (including by tender offer therefor with the proceeds of new Indebtedness). Holdings shall not, directly or indirectly make any payment or prepayment (optional or otherwise) on, or redemption of, or any pay- -107- ments in redemption, defeasance or repurchase (whether in cash, securities or other Property) of any Indebtedness or any Permitted Refinancing thereof, except (1) regularly scheduled mandatory payments of interest to the extent permitted by the subordination provisions thereof (if any), (2) the conversion or exchange of any Indebtedness into shares of common Equity Interests of Holdings, (3) pursuant to Permitted Refinancings (including by tender offer therefor with the proceeds of new Indebtedness) (4) with the proceeds of an issuance of Equity Interests by Holdings pursuant to an Initial Public Offering consummated on or prior to December 31, 2000. 9.22. MORTGAGE MATTERS.. Not later than thirty days following the Closing Date, each Obligor shall deliver to Administrative Agent, on behalf of the Lenders: (1) a Mortgage encumbering each Mortgaged Real Property in favor of Administrative Agent, for the benefit of the Lenders, duly executed and acknowledged by the Obligor that it is the owner of or holder of an interest in such Mortgaged Real Property, and otherwise in form for recording in the recording office of each Jurisdiction where each such Mortgaged Real Property is situated, together with such certificates, affidavits, questionnaires or returns as shall be required in connection with the recording or filing thereof to create a lien under applicable law, and such UCC-1 Financing Statements and other similar statements as are contemplated by the counsel opinions described in subsection 10 below in respect of such Mortgage, all of which shall be in form and substance reasonably satisfactory to Administrative Agent, and any other instruments necessary to grant a mortgage lien under the laws of any applicable jurisdiction, which Mortgage and financing statements and other instruments shall when recorded be effective to create a first priority Lien on such Mortgaged Real Property subordinate to no Liens other than Prior Liens applicable to such Mortgaged Real Property and subject to no other Liens except Liens expressly permitted by such Mortgage; (2) with respect to each Mortgaged Real Property, such consents, approvals, amendments, supplements, estoppels, tenant subordination agreements or other instruments as necessary or required to consummate the Transactions or as shall reasonably be deemed necessary by Administrative Agent in order for the owner or holder of the fee or leasehold interest constituting such Mortgaged Real Property to grant the Lien contemplated by the Mortgage with respect to such Mortgaged Real Property; (3) with respect to each Mortgage, a policy (or commitment to issue a policy) of title insurance insuring (or committing to insure) the Lien of such Mortgage as a valid first mortgage Lien on the Real Property and fixtures described therein in an amount equal to 115% of the fair market value thereof which policies (or commitments) shall (a) be issued by the Title Company, (b) to the extent necessary, include such reinsurance arrangements (with provisions for direct access) as shall be reasonably acceptable to Administrative Agent, (c) contain a "tie-in" or "cluster" endorsement (if available under applicable law) (i.e., policies which insure against losses regardless of location or allocated value of the insured property up to a stated maximum coverage amount), (d) have been supplemented by such endorsements (or where such en- -108- dorsements are not available, opinions of special counsel, architects or other professionals reasonably acceptable to Administrative Agent to the extent that such opinions can be obtained at a cost which is reasonable with respect to the value of the Real Property subject to such Mortgage) as shall be reasonably requested by Administrative Agent (including, without limitation, endorsements on matters relating to usury, first loss, last dollar, zoning, contiguity, revolving credit, doing business, non-imputation, public road access, survey, variable rate, environmental lien and so-called comprehensive coverage over covenants and restrictions), and (e) contain no exceptions to title other than exceptions for the Prior Liens applicable to such Mortgaged Real Property; (4) with respect to each Real Property and each Mortgaged Real Property, UCC, tax lien, judgment lien and pending lawsuit searches confirming that the personal property comprising a part of such Real Property or Mortgaged Real Property is subject to no Liens other than Prior Liens; (5) with respect to each Mortgaged Real Property, such affidavits, certificates, information (including financial data) and instruments of indemnification (including, without limitation, a so-called "gap" indemnification) as shall be reasonably required to induce the Title Company to issue the policy or policies (or commitment) and endorsements contemplated in subparagraph (3) above; (6) evidence reasonably acceptable to Administrative Agent of payment by Borrower of all title insurance premiums, search and examination charges, and related charges, mortgage recording taxes, fees, charges, costs and expenses required for the recording of the Mortgages and issuance of the title insurance policies referred to in subparagraph (3) above; (7) with respect to each Real Property or Mortgaged Real Property, copies of all Leases, subleases, leases in which Borrower or any Subsidiary holds the tenant's interest or other agreements relating to possessory interests, if any. To the extent any of the foregoing affect any Mortgaged Real Property, such agreement shall be subordinate to the Lien of the Mortgage to be recorded against such Mortgaged Real Property, either expressly by its terms or Obligor shall use reasonable efforts to obtain a subordination, non-disturbance and attornment agreement subordinating such agreement to the lien of the Mortgage and shall otherwise be acceptable to Administrative Agent; (8) with respect to each Mortgaged Real Property, Borrower and each Subsidiary shall have made all notification, registrations and filings, to the extent required by, and in accordance with, all State and Local Real Property Disclosure Requirements applicable to such Mortgaged Real Property, including the use of forms provided by state or local agencies, where such forms exist, whether to Borrower or to or with the state or local agency; -109- (9) with respect to each Mortgaged Real Property, an Officers' Certificate or other evidence reasonably satisfactory to Administrative Agent that as of the date thereof (a) to the knowledge of such officer, there is no material outstanding citation, notice of violation or similar notice issued by any Governmental Authority indicating that the Mortgaged Real Property contains conditions which are not in compliance with local codes or ordinances relating to building or fire safety or structural soundness, (b) there has not occurred any Casualty Event of any Mortgaged Real Property and (c) to the best knowledge of Borrower or any Subsidiary that is the owner of or the holder of an interest in such Mortgaged Real Property, there are no material disputes regarding boundary lines, location, encroachment or possession of such Mortgaged Real Property and no state of facts existing which could give rise to any such claim; and (10) an opinion of local counsel reasonably acceptable to the Administrative Agent substantially in the form of EXHIBIT E-2. 9.23. ACQUISITION DOCUMENTS.. Each Obligor shall perform and comply in all material respects with the terms and conditions of all Acquisition Documents. Each Obligor shall not without the consent of the Administrative Agent (which consent shall not be unreasonably withheld or delayed) (i) cancel or terminate any of the Acquisition Documents or consent to or accept any cancellation or termination thereof, (ii) amend, supplement or otherwise modify any of the Acquisition Documents (in each case as in effect on the date hereof), (iii) waive any default under or material breach of any of the Acquisition Documents or waive, fail to enforce, forgive or release any material right, interest, or entitlement of any kind, howsoever arising, under or in respect of such Acquisition Documents or, vary or agree to the variation of any of the provisions of any of such Acquisition Documents or of the performance of any other Person under any of such Acquisition Documents, or (iv) petition, request or take any other legal or administrative action which seeks, or may be expected, to rescind, terminate or suspend, any of the Acquisition Documents or amend or modify any thereof. Each Obligor shall notify the Administrative Agent in the event it receives any material notice or communication with respect to the Acquisition Documents including, without limitation, notices of default, and shall forward promptly copies of any such notices or communications to the Administrative Agent. In the event of any Obligor's default under any of the Acquisition Documents, the parties thereto shall permit the Administrative Agent to cure such default and thereafter perform any of such Obligor's obligations thereunder and such performance by the Administrative Agent will not constitute a default under any such Acquisition Document. Section 10. EVENTS OF DEFAULT. If one or more of the following events (herein called "EVENTS OF DEFAULT") shall occur and be continuing: (a) (i) Borrower shall default in the payment when due (whether at stated maturity upon prepayment or repayment or acceleration or otherwise) of any principal of any Loan or Reimbursement Obligation, or (ii) Borrower shall default in the payment when due of interest on any Loan or any Reimbursement Obligation or any fee or any other amount payable by it hereunder or under any other Credit Document when due and such default under this clause (ii) shall have continued unremedied for three or more Business Days; or -110- (b) (i) Any Company or Holdings shall default in the payment when due of any principal of or interest on any of its Indebtedness (other than the Loans) aggregating $2.5 million or more, beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created, after giving effect to any consents or waivers relating thereto obtained before the expiration of any such period of grace; or (ii) any Company or Holdings fails to perform or observe any other term, condition or covenant, or any other event shall occur or condition exist under any note, agreement, indenture or other document evidencing or relating to any Indebtedness aggregating $2.5 million or more if the effect of such event (after giving effect to any consents or waivers relating thereto obtained before the expiration of any such period of grace) is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause (with or without notice or passage of time or both), such Indebtedness to become due, or to be prepaid in full (whether by redemption, purchase, offer to purchase or otherwise), prior to its stated maturity, PROVIDED, HOWEVER, that this subsection (ii) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness; or (c) Any representation or warranty made or deemed made in any Credit Document (or in any modification or supplement thereto) by any Company or in any certificate furnished to any Agent or Lender pursuant to the provisions thereof, shall prove to have been incorrect, false or misleading as of the time made, deemed made or furnished in any material respect; or (d) Any Obligor shall default in the performance of any of its obligations under any of Sections 9.01(f), 9.05 through 9.11, 9.14, 9.15 or 9.17 through 9.21; or Borrower shall default in the performance of its obligations under Section 9.01(e) or (k) and such default shall continue unremedied for at least five Business Days; or any Obligor shall default in the performance of any of its other obligations in this Agreement, the Security Documents or the L/C Documents and such default shall continue unremedied for a period of at least thirty days after written notice thereof to such Obligor and Borrower by Administrative Agent or the Majority Lenders; or (e) Any Company or Holdings shall not, or shall admit in writing its inability to, or be generally unable to, pay its debts as such debts become due; or (f) Any Company or Holdings shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its Property, (ii) make a general assignment for the benefit of its creditors, (iii) commence or consents to any Insolvency Proceeding, (iv) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or readjustment of debts, (v) fail to controvert within 60 days or in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary Insolvency Proceeding, or (vi) take any corporate action for the purpose of effecting any of the foregoing; or (g) (i) Any Insolvency Proceeding is commenced or filed against any Company or Holdings, or any writ, judgment, warrant of attachment, execution or similar process is issued -111- or levied against any Company or Holdings, and either (1) such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded, within 60 days after commencement, filing or levy or (2) such proceeding shall not be actively contested by such Company or Holdings; (ii) any Company or Holdings admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding; (iii) any Company or Holdings acquiesces in the appointment of a receiver, receiver and manager, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor), or other similar person for itself or a substantial portion of its Property or business; or (iv) an order of relief against any Company or Holdings shall be entered in any Insolvency Proceeding; or (h) A final judgment or judgments for the payment of money in excess of $2.5 million in the aggregate (exclusive of judgment amounts to the extent covered by insurance) shall be rendered by one or more courts, administrative tribunals or other bodies having jurisdiction against any Company or Holdings and the same shall not be discharged (or provision which results in a stay of execution shall not be made for such discharge), vacated or bonded pending appeal, or a stay of execution thereof shall not be procured, within 60 days from the date of entry thereof and such Company or Holdings shall not, within said period of 60 days, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal; or (i) An ERISA Event or noncompliance with respect to Foreign Plans shall have occurred that when taken together with all other ERISA Events and noncompliance with respect to Foreign Plans that have occurred, is reasonably likely to result in liability of any Company or Holdings in an aggregate amount exceeding $1.0 million; or (j) Any Change of Control shall occur; or (k) Any Security Document after delivery thereof by any Obligor at any time shall cease to be in full force and effect, or ceases to give Administrative Agent the Liens, rights, powers and privileges purported to be created thereby, in favor of Administrative Agent on behalf of the Creditors, superior to and prior to the rights of all third Persons other than the holders of Prior Liens and subject to no other Liens except as expressly permitted by the applicable Security Document, or any judgment creditor having a Lien against any Collateral commences legal action to foreclose such Lien or otherwise exercise its remedies against any Collateral or any Company fails to comply with or to perform any material obligation or agreement under any Security Document within ten days after being requested by Administrative Agent or any Lender; or (l) Any Guarantee ceases to be in full force and effect (other than in connection with the release thereof authorized by Section 9.06) or any of the Guarantors repudiates, or attempts to repudiate, any of its obligation under any of the Guarantees; or (m) Any Credit Document or any material provision thereof shall at any time and for any reason be declared by a court of competent jurisdiction to be null and void, or a Proceed- -112- ing shall be commenced by any Company or Holdings or any other Person, or by any Governmental Authority, seeking to establish the invalidity or unenforceability thereof (exclusive of questions of interpretation of any provision thereof), or any Company or Holdings shall repudiate or deny in writing that it has any liability or obligation for the payment of principal or interest or other obligations purported to be created under any Credit Document; or (n) Any non-monetary judgment, order or decree is entered against any Company or Holdings which does or would reasonably be likely to have a Material Adverse Effect, and there shall be any period of 45 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (o) One or more FCC Authorizations shall be terminated or revoked such that Borrower is no longer able to operate the related Radio Station and retain the revenue received therefrom or one or more FCC Authorizations shall fail to be renewed at the stated expiration thereof such that Borrower is no longer able to operate the related Radio Station and retain the revenue received therefrom, except with respect to any of the foregoing in the event that the termination, revocation or failure to renew would result in the loss of less than 5% of Borrower's consolidated gross revenue; THEREUPON: (1) in the case of an Event of Default other than one referred to in clause (e), (f) or (g) of this Section 10, Administrative Agent may, and upon written direction of the Majority Lenders shall, by notice to Borrower, terminate the Commitments and/or declare the principal amount then outstanding of, and the accrued interest on, the Loans, the Reimbursement Obligations and all other amounts payable by Borrower hereunder and under the Notes (including any amounts payable under Section 5.05 or 5.06) to be forthwith due and payable, whereupon such amounts shall be immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by Borrower, reduce any claim to judgment, take any other action permitted by law and/or take any action permitted to be taken by the Security Documents during the existence of an Event of Default; and (2) in the case of the occurrence of an Event of Default referred to in clause (e), (f) or (g) of this Section 10, the Commitments shall automatically be terminated and the principal amount then outstanding of, and the accrued interest on, the Loans, the Reimbursement Obligations and all other amounts payable by Borrower hereunder and under the Notes (including any amounts payable under Section 5.05 or 5.06) shall automatically become immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by each Obligor. In addition, Borrower agrees, that upon the occurrence and during the continuance of any Event of Default it shall, if requested by Administrative Agent or the Majority Revolving Lenders through Administrative Agent (and, in the case of any Event of Default referred to in clause (e), (f) or (g) of this Section 10 with respect to any Company, forthwith, without any demand or the taking of any other action by Administrative Agent or such Lenders) provide cover for the L/C Liabilities by paying to Administrative Agent immediately available funds in an amount equal to the then aggregate undrawn face amount of all Letters of Credit, which funds shall be held by Administrative Agent in the Collateral Account as collateral security in the first instance for the L/C Liabilities and be subject to withdrawal only as provided in the Security Agreement. -113- Section 11. AGENTS. 11.01. GENERAL PROVISIONS. Each of the Lenders, Agents and L/C Lender hereby irrevocably appoints Administrative Agent as its agent and authorizes Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to Administrative Agent by the terms hereof and the Security Documents, together with such actions and powers as are reasonably incidental thereto. Administrative Agent agrees to give promptly to each Lender a copy of each notice or other document received by it pursuant to any Credit Document (other than any that are required to be delivered to the Lenders by any Obligor). The Lender or other financial institution serving as any Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not such Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with any Company or other Affiliate thereof as if it were not such Agent hereunder. No Agent shall have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (a) no Agent shall be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) no Agent shall have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that such Agent is required to exercise in writing by the Majority Lenders (or such other number or percentage of the Lenders as shall be required by Section 12.04), and (c) except as expressly set forth herein, no Agent shall have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to any Company that is communicated to or obtained by the financial institution serving as such Agent or any of its Affiliates in any capacity. No Agent shall be liable for any action taken or not taken by it with the consent or at the request of the Majority Lenders (or such other number or percentage of the Lenders as shall be required by Section 12.04) or in the absence of its own gross negligence or willful misconduct. No Agent shall be deemed to have knowledge of any Default unless and until written notice thereof is given to Administrative Agent and such Agent by Borrower or a Lender, and no Agent shall be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Credit Document, (ii) the contents of any certificate, report or other document delivered hereunder or under any other Credit Document or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of any Credit Document or any other agreement, instrument or document, (v) the satisfaction of any condition set forth in Section 7 or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to such Agent or (vi) making a determination that any condition precedent set forth in Section 7 that is to be to such Agent's satisfaction is satisfied. Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. Each Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. Each Agent may consult with legal counsel (who may be counsel for Borrower), independent accountants and other experts selected by it, and -114- shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. Each Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with such Agent. Each Agent shall be fully justified in failing or refusing to take any action under any Credit Document unless it shall first receive such advice or concurrence of the Majority Lenders (or, if so specified by this Agreement, all Lenders or such other number or percentage of the Lenders as shall be required by Section 12.04) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action (it being understood that this provision shall not release Administrative Agent from performing any action with respect to Borrower expressly required to be performed by it pursuant to the terms hereof) under this Agreement. Each Agent shall in all cases be fully protected in acting, or in refraining from acting, under any Credit Document in accordance with a request of the Majority Lenders (or, if so specified by this Agreement, all Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. Each Agent may perform any and all of its duties and exercise its rights and powers by or through any one or more sub-agents appointed by such Agent and reasonably acceptable to Borrower. Each Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers through their respective Affiliates, directors, officers, employees, agents and advisors ("RELATED PARTIES"). The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of each Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities of such Agent. Subject to the appointment and acceptance of a successor Agent as provided in this paragraph, any Agent may resign at any time by notifying the Lenders, L/C Lender (with respect to Administrative Agent only) and Borrower. Upon any such resignation, the Majority Lenders shall have the right to appoint a successor which, so long as no Event of Default is continuing, shall be reasonably acceptable to Borrower. If no successor shall have been so appointed by the Majority Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders and L/C Lender, appoint a successor Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank which, so long as no Event of Default is continuing, shall be reasonably acceptable to Borrower. Upon the acceptance of its appointment as Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. The fees payable by Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between Borrower and such successor. After Agent's resignation hereunder, the provisions of this Section 11 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as such Agent. Each Lender acknowledges that it has, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also ac- -115- knowledges that it will, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder. No Agent shall be deemed a trustee or other fiduciary on behalf of any party. 11.02. INDEMNIFICATION. Each Lender agrees to indemnify and hold harmless each Agent (to the extent not reimbursed under Section 12.03, but without limiting the obligations of any Obligor under Section 12.03), ratably in accordance with the aggregate principal amount of the respective Commitments of and/or Loans and Reimbursement Obligations held by the Lenders (or, if all of the Commitments shall have been terminated or expired, ratably in accordance with the aggregate outstanding amount of the Loans and Reimbursement Obligations held by the Lenders), for any and all claims, liabilities (including pursuant to any Environmental Law), obligations, losses, damages, penalties, actions, judgments, deficiencies, suits, costs, out-of-pocket expenses (including reasonable attorney's fees) or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against such Agent (including by any Lender) arising out of or by reason of any investigation in or in any way relating to or arising out of any Credit Document or any other documents contemplated by or referred to therein or for any action taken or omitted to be taken by such Agent under or in respect of any of the Credit Documents or other such documents or the transactions contemplated thereby (including the costs and out-of-pocket expenses that the Obligors are obligated to pay under Section 12.03, and including also any payments under any indemnity granted pursuant to Section 18 of the Security Agreement, or to any Financial Intermediary referred to in Section 9 of the Security Agreement to which remittances in respect of Receivables, as defined in the Security Agreement, are to be made but excluding, unless a Default has occurred and is continuing, normal administrative costs and expenses incident to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents; PROVIDED, HOWEVER, that no Lender shall be liable for any of the foregoing to the extent determined by a court of competent jurisdiction in a final nonappealable judgment to have resulted from the gross negligence, bad faith or willful misconduct of the party to be indemnified. The agreements set forth in this Section 11.02 shall survive the payment of all Loans and other obligations hereunder and shall be in addition to and not in lieu of any other indemnification agreements contained in any other Credit Document. 11.03. CONSENTS UNDER OTHER CREDIT DOCUMENTS. Except as otherwise provided in the Credit Documents, Administrative Agent may, with the prior consent of the Majority Lenders (but not otherwise), consent to any modification, supplement or waiver under any of the other Credit Documents. 11.04. COLLATERAL SUB-AGENTS. Each Lender by its execution and delivery of this Agreement agrees, as contemplated by Section 9(g) of the Security Agreement, that, in the event it shall hold any Cash Equivalents referred to therein, upon the written request of Administrative Agent following the occurrence of an Event of Default and the execution and delivery by Administrative Agent, such Lender and the applicable Obligor of a mutually acceptable control agreement with respect to such Cash Equivalent (it being understood that no Lender is obligated to enter into any such control agreement), such Cash Equivalents shall be held in the name and under the control of such Lender, and such Lender shall hold such Cash Equivalents as a collateral sub-agent for Administrative Agent thereunder. Each Obligor by its execution and delivery of this Agreement hereby consents to -116- the foregoing. In such event, such Lender acting in the capacity of a sub-agent shall be afforded all protections set forth in Section 11 as if acting as Administrative Agent with respect to such holdings. Notwithstanding anything in this Agreement or any other Credit Document to the contrary, except as set forth in Section 4.07 hereof, no Lender (other than Administrative Agent acting in such capacity) which is acting as a Financial Intermediary (as defined in the Security Agreement) with respect to any Financial Account Collateral (as defined in the Security Agreement) shall have any duty or obligation (whether express or implied) to the other Lenders in respect of such Financial Account Collateral or the disposition thereof unless such Lender, Administrative Agent and the applicable Obligor have entered into a Financial Account Consent Agreement (as defined in the Security Agreement) or other control or similar agreement with respect to such Financial Account Collateral (it being understood that no Lender shall have any obligation to enter into any such agreement). Section 12. MISCELLANEOUS. 12.01. WAIVER. No failure on the part of any Creditor to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under any Credit Document shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under any Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. 12.02. NOTICES. Any notice, request, demand, direction or other communication (for purposes of this Section 12.02 only, a "Notice") to be given to or made upon any party hereto under any provision of this Agreement shall be given or made by telephone or in writing (which includes by means of electronic transmission (i.e., "e-mail") or facsimile transmission or by setting forth such Notice on a site on the World Wide Web (a "Website Posting") if Notice of such Website Posting (including the information necessary to access such site) has previously been delivered to the applicable parties hereto by another means set forth in this Section 12.02) in accordance with this Section 12.02. Any such Notice must be delivered to the applicable parties hereto at the addresses and numbers set forth under their respective names under "Address for Notices" on the signature pages hereof or in accordance with any subsequent unrevoked Notice from any such party that is given in accordance with this Section 12.02. Any Notice shall be effective: (a) In the case of hand-delivery, when delivered; (b) If given by mail, four days after such Notice is deposited with the United States Postal Service, with first-class postage prepaid, return receipt requested; (c) In the case of a telephonic Notice, when a party is contacted by telephone, if delivery of such telephonic Notice is confirmed no later than the next Business Day by hand delivery, a facsimile or electronic transmission, a Website Posting or an overnight courier delivery of a confirmatory Notice (received at or before noon on such next Business Day); (d) In the case of a facsimile transmission, when sent to the applicable party's facsimile machine's telephone number, if the party sending such Notice receives confirmation of the delivery thereof from its own facsimile machine; -117- (e) In the case of electronic transmission, when actually received; (f) In the case of a Website Posting, upon delivery of a Notice of such posting (including the information necessary to access such site) by another means set forth in this Section 12.02; and (g) If given by any other means (including by overnight courier), when actually received. Any Lender giving a Notice to an Obligor shall concurrently send a copy thereof to the Administrative Agent, and the Administrative Agent shall promptly notify the other Lenders of its receipt of such Notice. 12.03. EXPENSES, INDEMNIFICATION, ETC. (a) The Obligors, jointly and severally, agree to pay or reimburse: (i) Agents for all of their reasonable out-of-pocket costs and expenses (including the reasonable fees and expenses of Cahill Gordon & Reindel or other counsel to Agents selected by Agents (and all local counsel deemed necessary by Agents)) in connection with (1) the negotiation, preparation, execution and delivery of the Credit Documents and the extension and syndication of credit hereunder, (2) the negotiation or preparation of any modification, supplement or waiver of any of the terms of any Credit Document (whether or not consummated or effective) and (3) the syndication of the Loans and Commitments; (ii) each Lender and Agent for all reasonable out-of-pocket costs and expenses of such Lender or Agent (including the reasonable fees and expenses of legal counsel and costs with internal counsel) in connection with (1) any enforcement or collection proceedings resulting from any Default, including all manner of participation in or other involvement with (x) bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation proceedings, (y) judicial or regulatory proceedings and (z) workout, restructuring or other negotiations or proceedings (whether or not the workout, restructuring or transaction contemplated thereby is consummated), (2) the enforcement of this Section 12.03 and (3) any documentary taxes; and (iii) Administrative Agent for all reasonable out-of-pocket costs, expenses, taxes, assessments and other charges (including reasonable fees and disbursements of counsel) incurred in connection with any filing, registration, recording or perfection of any security interest contemplated by any Credit Document or any other document referred to therein. (b) The Obligors, jointly and severally, hereby agree to indemnify each Lender and Agent and their respective Affiliates, directors, trustees, officers, employees and agents (each, an "INDEMNITEE") from, and hold each of them harmless against, and that no Indemnitee will have any liability for, any and all Losses incurred by any of them (including any and all Losses incurred by any Agent or L/C Lender to any Lender, whether or not any Lender or Agent is a party thereto) directly or indirectly arising out of or by reason of or relating to the negotiation, execution, delivery, performance, administration or enforcement of any Credit Document, any of the transactions contemplated by the Credit Documents (including the Transactions), any breach by any Company of any representa- -118- tion, warranty, covenant or other agreement contained in any Credit Document in connection with any of the Transactions, the use or proposed use of any of the Loans or Letters of Credit, the issuance of or performance under any Letter of Credit or the use of any collateral security for the Loans (including the exercise by any Lender or Agent of the rights and remedies or any power of attorney with respect thereto and any action or inaction in respect thereof), including all amounts payable by any Lender pursuant to Section 11.02, but excluding any such Losses to the extent determined by a court of competent jurisdiction in a final nonappealable judgment to have resulted from the gross negligence, bad faith or willful misconduct of the Indemnitee. Without limiting the generality of the foregoing, the Obligors, jointly and severally, will indemnify each Lender and Agent and each other Indemnitee from, and hold each Lender and Agent and each other Indemnitee harmless against, any Losses described in the preceding sentence arising under any Environmental Law as a result of (A) the past, present or future operations of any Company (or any predecessor in interest to any Company), (B) the past, present or future condition of any site or facility owned, operated, leased or used at any time by any Company (or any such predecessor in interest), or (C) any Release or threatened Release of any Hazardous Materials at, on, under or from any such site or facility, including any such Release or threatened Release that shall occur during any period when any Lender or Agent shall be in possession of any such site or facility following the exercise by such Lender or Agent of any of its rights and remedies hereunder or under any of the Security Documents; PROVIDED, HOWEVER, that the indemnity hereunder shall be subject to the exclusions from indemnification set forth in the preceding sentence. To the extent that the undertaking to indemnify and hold harmless set forth in this Section 12.03 or any other provision of any Credit Document providing for indemnification is unenforceable because it is violative of any law or public policy or otherwise, the Obligors, jointly and severally, shall contribute the maximum portion that each of them is permitted to pay and satisfy under applicable law to the payment and satisfaction of all indemnified liabilities incurred by any of the Persons indemnified hereunder. Notwithstanding anything contained in this Agreement to the contrary, in no event shall any Indemnitee have any liability for any special, indirect or consequential damages. The Obligors also agree that no Indemnitee shall have any liability (whether direct or indirect, in contract or tort or otherwise) for any Losses to any Obligor or any Obligor's security holders or creditors resulting from, arising out of, in any way related to or by reason of any matter referred to in any indemnification or expense reimbursement provisions set forth in any Credit Document, except to the extent that any Loss is determined by a court of competent jurisdiction in a final nonappealable judgment to have resulted from the gross negligence, bad faith or willful misconduct of such Indemnitee. The Obligors agree that, without the prior written consent of Administrative Agent, Syndication Agent and the Majority Lenders which consent shall not be unreasonably withheld, no Obligor will settle, compromise or consent to the entry of any judgment in any pending or threatened Proceeding in respect of which indemnification is reasonably likely to be sought under the indemnification provisions of this Section 12.03 (whether or not any Indemnitee is an actual or potential party to such Proceeding), unless such settlement, compromise or consent includes an unconditional written release of each Indemnitee from all liability arising out of such Proceeding and does not include any -119- statement as to an admission of fault, culpability or failure to act by or on behalf of any Indemnitee and does not involve any payment of money or other value by any Indemnitee or any injunctive relief or factual findings or stipulations binding on any Indemnitee. 12.04. AMENDMENTS, ETC. (i) No provision of any Credit Document may be amended, modified or supplemented except by an instrument in writing signed by the Obligors party thereto and the Majority Lenders, or by the Obligors party thereto and Administrative Agent acting with the written consent of the Majority Lenders, and no provision of any Credit Document may be waived except by an instrument in writing signed by the Obligors party thereto and the Majority Lenders, or by the Obligors party thereto and Administrative Agent acting with the written consent of the Majority Lenders; provided, HOWEVER, that: (a) no amendment, modification, supplement or waiver shall, unless by an instrument signed by each Lender or by Administrative Agent acting with the written consent of each Lender (with the consent of Lenders having Obligations directly affected thereby in the case of clauses (I), (II) or (IV) (it being understood that the consent of no other Lender or Agent is needed in each such case)): (I) extend the scheduled final maturity of any Loan or Note, or extend the expiration date of any Letter of Credit beyond the R/C Termination Date, or reduce the rate of interest (other than any waiver of any increase in the interest rate applicable to any of the Loans pursuant to clause (b) of Section 3.02) or fees thereon, or extend the time of payment of interest or fees thereon (other than in connection with the extension of any scheduled payment hereunder otherwise permitted hereby), or reduce the principal amount thereof, or make any change to the definition of Applicable Margin or Applicable Revolving Credit Fee Percentage (or SCHEDULE 1.01(a) or (b)) or any defined term used therein in the context of being used therein in each case if the effect thereof would be to reduce the rate of interest or any fee applicable to any Loan or Commitment from that previously in effect (it being understood that any increase in the rate of interest or fee applicable to any Loan or Commitment only requires the consent of the Majority Lenders), or, subject to Section 12.04(iv), make any change to the last sentence of the first paragraph of Section 2.09, or reduce the Reimbursement Obligation in respect of any Letter of Credit, (II) extend the final maturity of any of the Commitments or amend Section 2.04(a), (III) change the currency in which any Obligation is payable, (IV) amend the terms of this Section 12.04 or clause (iv) of Section 12.06(b), Section 4.02, 4.07, 5 or 11.03, (V) reduce the percentages specified in the definition of the term "Majority Lenders" or "Requisite Tranche Lenders" or amend any provision of any Credit Document requiring the consent of all the Lenders or reduce any other percentage of the Lenders required to make any determinations or waive any rights hereunder or to modify any provision hereof (it being understood, however, that only the consent of the Lenders included in such percentage need be obtained), (VI) release any Guarantor from its obligations under Section 6 (unless permitted by this Agreement), (VII) consent to the assignment or transfer by any Obligor of any of its rights and obligations under any Credit Document (except that in a transaction permitted by Section 9.06 resulting in any Obligor (except Borrower) assigning its rights and obligations under the Credit Documents to any other Obligor no consent of any Lender or Agent need be obtained), (VIII) release all or substantially all the Collateral or terminate the Lien under any Credit Document in respect of all or substantially all the Collateral (except as permitted by the Credit Documents) or agree to additional obligations (other than the Obligations and any other extensions of credit under this Agreement (or any other agree- -120- ment) consented to by the Majority Lenders) being secured by the Collateral, (IX) amend Section 12.03 or any other indemnification and expense reimbursement provision set forth in any Credit Document in any manner adverse to any Lender or (X) provide for Interest Periods with a longer period than the then longest available Interest Period; (b) no such amendment or waiver shall increase the Commitments of any Lender over the amount thereof then in effect without the consent of such Lender (it being understood that amendments or waivers of conditions precedent, covenants or Defaults shall not constitute an increase of the Commitment of any Lender); (c) any modification or supplement of or waiver with respect to Section 11 which affects any Agent in its capacity as such shall require the consent of such Agent; (d) no consent of any Lender need be obtained, and Administrative Agent is hereby authorized, to release any Lien securing the Obligations on Property which is the subject of any disposition permitted by the Credit Documents and to release any Guarantee of a Subsidiary upon the sale of all of the Equity Interests of such Subsidiary or such Subsidiary's parent company in accordance with the Credit Documents; (e) subject to clause (a)(I) of this proviso to this Section 12.04(i), the consent of the Requisite Tranche Lenders of the affected Term Facility (but no other Lender or Agent) shall be required with respect to any extension of any scheduled Amortization Payment or any reduction in the amount of any scheduled Amortization Payment (except in accordance with Sections 2.09, 2.10 or 2.11); (f) no modification, supplement or waiver shall alter the provisions of the first paragraph of Section 2.10(b) or the provisions of Section 2.11(b) in a manner that would reduce the proportion of any prepayment under Section 2.10(a) or Section 2.11(a) to be allocated to any Tranche or the order of application among the Tranches or the order of application to Loans within a Tranche, in each case without the consent of the Requisite Tranche Lenders of the Tranche proposed to be allocated a lesser prepayment or to have its order of priority changed or have the order of application within such Tranche changed as a result thereof (it being understood that the increase of any Tranche or the addition of a new tranche of credit that is afforded substantially the same rights under Section 2.10(b) and 2.11 (b) as the Tranches of the same type are then treated under Section 2.10(b) and 2.11(b) shall only require the consent of the Majority Lenders); (g) no reduction of the percentage specified in the definition of "Majority Revolving Lenders" shall be made without the consent of each Revolving Lender (it being understood that no consent of any other Lender or Agent is needed); (h) no reduction of the percentage specified in any subclause of the definition of "Requisite Tranche Lenders" shall be made without the consent of each Lender of the Tranche contemplated by such subclause (it being understood that no consent of any other Lender or Agent is needed); -121- (i) no amendment or waiver shall affect the rights or duties of L/C Lender in its capacity as such or alter the obligation of any Revolving Lender pursuant to Section 2.03(e) or 2.03(f) without the consent of L/C Lender; (j) no consent of any Lender need be obtained to effect any amendment of any Credit Document necessary to comply with Section 9.12 or Section 9.20; (k) subject to Section 12.04(iv), no amendment or waiver of the second paragraph of Section 2.09 or the second sentence of Section 2.10(b)(i) may be made without the consent of the Lenders having at least 75% of the Commitments or Loans of the Term Facility affected thereby; (l) no amendment, modification, supplement or waiver may be made to any condition precedent to any extension of credit under the Revolving Facility set forth in subsection 7.04 without the written consent of the Majority Revolving Lenders, it being understood that no amendment to or waiver of any representation or warranty or any covenant contained in any Credit Document, or of any Default, shall be deemed to be effective for purposes of determining whether the conditions precedent set forth in subsection 7.04 to the making of any extension of credit under the Revolving Loans have been satisfied unless the Majority Revolving Lenders shall have consented to such amendment or waiver; (m) so long as any Term A Facility Loans, Revolving Loans or L/C Liabilities are outstanding or any Revolving Commitments are in effect, the date then in effect for any scheduled Amortization Payment or the scheduled final maturity of any Loan or Note of the Term B Facility Loans or the Term C Facility Loans may not be made earlier than the date then in effect and the then applicable amount of any such Amortization Payment (other than the last Amortization Payment thereon) may not be increased without the consent of the Lenders holding a majority of the sum of the Revolving Loans, L/C Liabilities, Unutilized Revolving Commitments then in effect and Term A Facility Loans (such Lenders holding such credit exposure, the "MAJORITY PRO RATA LENDERS") then outstanding; (n) so long as Term A Facility Loans, Revolving Loans or L/C Liabilities are outstanding, any Revolving Commitments are in effect or any Term B Facility Loans are outstanding, the date then in effect for any scheduled Amortization Payment or the scheduled final maturity of any Loan or Note of the Term C Facility Loans may not be made earlier than the date then in effect and the then applicable amount of any such Amortization Payment (other than the last Amortization Payment thereon) may not be increased without the consent of the Majority Pro Rata Lenders (if any such extension of credit under the Revolving Facility or Term A Facility Loans are outstanding or any Revolving Commitments are in effect) and the consent of the Lenders holding a majority of the Term B Facility Loans then outstanding; (o) no change shall be made to Section 2.10(b) that provides for the Revolving Loans being repaid (or L/C Obligations being cash collateralized) or Revolving Commitments being reduced prior to the time that no Term Loans are outstanding with the Net Available Proceeds of any transaction or event that pursuant to Section 2.10(a)(i) or Section 2.10(a)(iv) would otherwise require prepayment of Term Loans without the consent of the Lenders holding at -122- least a majority of the sum of the aggregate amount of the Term B Facility Loans and Term C Facility Loans (such Lenders of the Term B Facility Loans and Term C Facility Loans voting together as one class) then outstanding (it being understood that the consent of no other Lender or Agent need be obtained). (ii) If, in connection with any proposed change, waiver, discharge or termination to any of the provisions of this Agreement as contemplated by Section 12.04(i)(a) (other than clause (I) of such section), the consent of the Majority Lenders is obtained but the consent of one or more of such other Lenders whose consent is required is not obtained, then Borrower shall have the right to replace one or more of such non-consenting Lender or Lenders (so long as all non-consenting Lenders are so replaced) with one or more Replacement Lenders pursuant to Section 2.11 so long as at the time of such replacement each such Replacement Lender consents to the proposed change, waiver, discharge or termination; PROVIDED, HOWEVER, that Borrower shall not have the right to replace a Lender solely as a result of the exercise of such Lender's rights (and the withholding of any required consent by such Lender) pursuant to clause (I) of Section 12.04(i)(a). (iii) Notwithstanding anything herein to the contrary, (A) with the consent of the Majority Lenders, other additional extensions of credit pursuant to this Agreement may be included in the determination of the Majority Lenders, Majority Revolving Lenders and Requisite Tranche Lenders without notice to or consent of any other Lender or Agent on substantially the same basis as the Commitments (and related extensions of credit) are included on the Closing Date, and (B) it is agreed and understood that, subject to clauses (f), (m) and (n) of Section 12.04(i), any prepayment required by Section 2.10 (and any corresponding reduction of the Revolving Commitments) may be modified, supplemented or waived by the Majority Lenders. (iv) Notwithstanding anything herein to the contrary, upon any additional extensions of credit under this Agreement being approved by the written consent of the Majority Lenders, Lead Arranger, Administrative Agent and the Obligors are hereby authorized to effect amendments (without notice to or the consent of any other Lender or Agent) to (i) Sections 1.01 and 1.03 for the purpose of including such appropriate defined terms as may be necessary and apply to such additional extensions of credit being incorporated into this Agreement to identify it as a separate Class of Loans (and within the definition of "Commitments", "Loans", etc.) hereunder (if necessary), and to include it in the various defined terms relating to required percentages of outstanding extensions of credit hereunder for purposes of amendments and waivers to the Credit Documents (e.g., "Majority Lenders", "Requisite Tranche Lenders") so long as treated on substantially the same terms as other Classes of Loans are then treated; (ii) Section 2.08 to effect conforming changes to reflect such new Class; (iii) Section 2.09 to treat any such new Class that is a term extension of credit on substantially the same terms as the Term Facilities are then treated (including, for any new Class held by lenders similar to the Lenders of the Term B Facility or Term C Facility, the provisions of the second paragraph of Section 2.09) (it being understood that the order of application of optional prepayments to amortization payments for such new Class shall be as agreed between the Obligors and the lenders extending such new credit in their sole discretion) and to treat any such new Class that is a revolving facility on substantially the same terms as the Revolving Facility is then treated; (iv) Section 2.10(b) to treat any such new Class that is a term extension of credit on substantially the same terms as the Term Facilities are then treated (including, for any new Class held by lenders similar to the Lenders of the Term B Facility or Term C Facility, the provisions of the last sentence of Section 2.10(b)(i)) (it being understood that the order of -123- application of mandatory prepayments to amortization payments for such new Class shall be as agreed between the Obligors and the lenders extending such new credit in their sole discretion) and to treat any such new Class that is a revolving facility on substantially the same terms as the Revolving Facility is then treated; and (v) Section 3.01(b)(1) to provide for the amortization for such new Class of Loans as provided for by the lenders thereof and the Obligors in their sole discretion so long as the Weighted Average Life to Maturity of any new term extension of credit is not less than that of the then existing Term Loans and the Weighted Average Life to Maturity of any revolving extension of credit is not less than that of the Revolving Commitments then in effect. 12.05. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. 12.06. ASSIGNMENTS AND PARTICIPATIONS. (a) No Obligor may assign its respective rights or obligations hereunder or under the Notes or any other Credit Document without the prior written consent of all of the Lenders. (b) Each Lender may assign (which may be non-PRO RATA among Loans and Commitments) to any Eligible Person any of its Loans, its Notes, its L/C Interests and its Commitments (but only with the consent (which shall not be unreasonably withheld, delayed or conditioned) of Borrower, Lead Arranger, Administrative Agent and, in the case of the Revolving Commitment, L/C Lender); PROVIDED, HOWEVER, that (i) no consent of Borrower, Lead Arranger, Administrative Agent, or L/C Lender shall be required in the case of any assignment to another Lender or any Lender's Affiliate or an Approved Fund of any Lender (in which case, the assignee and assignor Lenders shall give notice of the assignment to Lead Arranger and Administrative Agent); (ii) no consent of Borrower need be obtained if any Event of Default shall have occurred and be continuing or if Lead Arranger, in consultation with Borrower, determines that such assignment is necessary to achieve a successful syndication; (iii) each assignment, other than to a Lender or any Lender's Affiliate or an Approved Fund of any Lender and other than any assignment effected by either Joint Lead Arranger or any of their respective Affiliates in connection with the syndication of the Commitments and/or Loans or otherwise, shall not reduce the assignor's Loans and Commitments to less than $1.0 million (unless reduced to $0 or unless Borrower and Lead Arranger otherwise consent) and shall be in an aggregate amount of at least $1.0 million (unless the assignor's Loans and Commitments are reduced to $0 or unless Borrower and Lead Arranger otherwise consent) and (iv) in no event may any such assignment be made to any Obligor or any of its Affiliates without consent of all Lenders unless the Assignee agrees in writing that its Loans or Notes shall not be deemed outstanding for any matter under Section 12.04 or any other vote or consent of the Lenders under the Credit Documents. Any assignment of a Loan shall be effective only upon appropriate entries with respect thereto being made in the Register (and each Note shall expressly so provide). Any assignment or transfer of a Loan shall be registered on the Register only upon surrender for registration of assignment or transfer of the Note evidencing such Loan (if a Note was issued in respect thereof), accompanied by an instrument in writing substantially in the form of EXHIBIT F, and upon consent thereto by Borrower, Administrative Agent, Lead Arranger and L/C Lender to the extent required above (none of which consents to be unreasonably withheld, delayed or conditioned), one or more new Notes (if requested by the New Lender) in the same aggregate principal amount shall be issued to the designated assignee (or its nominee) and the old Notes shall be returned by Administrative Agent to Borrower marked "cancelled". Upon execution and delivery by the assignee to Borrower, Administrative Agent and Lead Arranger of an instrument in writing substan- -124- tially in the form of EXHIBIT F, and upon consent thereto by Borrower, Lead Arranger, Administrative Agent and L/C Lender to the extent required above (none of which consents to be unreasonably withheld, delayed or conditioned), and in the case of a Loan, upon appropriate entries being made in the Register the assignee shall have, to the extent of such assignment (unless otherwise provided in such assignment with the consent of Administrative Agent), the obligations, rights and benefits of a Lender hereunder holding the Commitment(s), Loans (or portions thereof) and L/C Interests assigned to it (in addition to the Commitment(s), L/C Interests and Loans, if any, theretofore held by such assignee) and the assigning Lender shall, to the extent of such assignment, be released from the Commitment(s) (or portion(s) thereof) so assigned. Upon any such assignment (other than to a Lender or any Affiliate of a Lender or any Approved Fund and other than any assignment by any Agent or any of their respective Affiliates) the assignee Lender shall pay a fee of $3,500 to Administrative Agent. Upon any such assignment, certain rights and obligations of the assigning Lender shall survive as set forth in Section 12.07. Each assignment shall be made pursuant to an agreement substantially in the form of EXHIBIT L. (c) A Lender may sell or agree to sell to one or more other Persons a participation in all or any part of any Loans and L/C Interests held by it, or in its Commitments, in which event each purchaser of a participation (a "PARTICIPANT") shall be entitled to the rights and benefits of the provisions of Section 5 (PROVIDED, HOWEVER, that no Participant shall be entitled to receive any greater amount pursuant to Section 5 than the transferor Lender would have been entitled to receive in respect of the participation effected by such transferor Lender had no participation occurred) with respect to its participation in such Loans, L/C Interests and Commitments as if such Participant were a "Lender" for purposes of said Section, but, except as otherwise provided in Section 4.07(c), shall not have any other rights or benefits under any Credit Document (the Participant's rights against such Lender in respect of such participation to be those set forth in the agreements executed by such Lender in favor of the Participant). All amounts payable by Borrower to any Lender under Section 5 in respect of Loans, L/C Interests and its Commitments shall be no greater than the amount that would have applied if such Lender had not sold or agreed to sell any participation in such Loans, L/C Interests and Commitments, and as if such Lender were funding each of such Loan, L/C Interests and Commitments in the same way that it is funding the portion of such Loan, L/C Interests and Commitments in which no participations have been sold. In no event shall a Lender that sells a participation agree with the Participant to take or refrain from taking any action hereunder or under any other Credit Document, except that such Lender may agree with the Participant that it will not, without the consent of the Participant, agree to any modification or amendment set forth in subclauses (I), (II), (III) or (VIII) of clause (a) of the proviso to Section 12.04 to the extent such Lender's consent is required therefor. (d) In addition to the assignments and participations permitted under the foregoing provisions of this Section 12.06, any Lender may assign and pledge all or any portion of its Loans and its Notes to any United States Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank and, in the case of a Lender that is a fund that invests in bank loans, any such Lender may assign or pledge all or any portion of its Loans and its Notes to any holders of obligations owed, or securities issued, by such fund, as security for such obligations or securities, or to any trustee for, or any other representative of, such holders, without notice to or consent of Borrower, Administrative Agent, Lead Arranger or L/C Lender. Any transfer as a result of the foreclosure on such -125- pledge shall be subject to Section 12.06(b). No such assignment shall release the assigning Lender from its obligations hereunder. (e) A Lender may furnish any information concerning any Company in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants) subject, however, to and so long as the recipient agrees to be bound by the provisions of Section 12.11. In addition, each Agent may furnish any information concerning any Obligor or any of its Affiliates in such Agent's possession to any Affiliate of such Agent, subject, however, to the provisions of Section 12.11. The Obligors shall assist any Lender in effectuating any assignment or participation pursuant to this Section 12.06 (including during syndication) in whatever manner such Lender reasonably deems necessary, including participation in meetings with prospective transferees. 12.07. SURVIVAL. The obligations of the Obligors under Sections 5.01, 5.05, 5.06 and 12.03, the obligations of each Guarantor under Section 6.03, and the obligations of the Lenders under Sections 5.06 and 11.02, shall survive the repayment of the Loans and Reimbursement Obligations and the termination of the Commitments and, in the case of any Lender that may assign any interest in its Commitments, Loans or L/C Interest hereunder, shall (to the extent relating to such time as it was a Lender) survive the making of such assignment, notwithstanding that such assigning Lender may cease to be a "Lender" hereunder. In addition, each representation and warranty made, or deemed to be made by a notice of any extension of credit, herein or pursuant hereto shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the Notes and the making of any extension of credit hereunder, regardless of any investigation made by any such other party or on its behalf and notwithstanding that Administrative Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty and regardless of whether any such representation or warranty under the Allentown Acquisition Agreement or Aurora Acquisition Agreement survives thereunder. 12.08. CAPTIONS. The table of contents and captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. 12.09. COUNTERPARTS; INTERPRETATION; EFFECTIVENESS. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the Fee Letter, the Administrative Agent's Fee Letter (as defined in the Commitment Letter) constitute the entire contract among the parties thereto relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof, other than the Fee Letter and the indemnity, confidentiality, waiver of jury trial and governing law provisions of the Commitment Letter and the provisions of Section 2 of the Commitment Letter, which are not superseded and survive solely as to the parties thereto. This Agreement shall become effective when the Closing Date shall have occurred and this Agreement shall have been executed and delivered by the Obligors and each Agent and when Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. Upon -126- the effectiveness of this Agreement, all commitments to provide any financing pursuant to the Commitment Letter shall permanently terminate. 12.10. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVERS; ETC. (a) Each Credit Document shall be governed by, and construed in accordance with, the law of the State of New York, without regard to the principles of conflicts of laws thereof (except in the case of the other Credit Documents, to the extent otherwise expressly stated therein). Each Obligor hereby irrevocably and unconditionally: (I) submits for itself and its Property in any Proceeding relating to any Credit Document to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Supreme Court of the State of New York sitting in New York County, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (II) consents that any such Proceeding may be brought in any such court; (III) agrees that service of process in any such Proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to Borrower at its address set forth on the signature page hereto or at such other address of which Administrative Agent shall have been notified pursuant thereto; and (IV) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction. (b) EACH OBLIGOR, EACH AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY AND FOR ANY COUNTERCLAIM THEREIN. 12.11. CONFIDENTIALITY. Each Lender agrees to keep confidential information obtained by it pursuant to the Credit Documents confidential in accordance with such Lender's customary practices and agrees that it will only use such information in connection with the transactions contemplated hereby and not disclose any of such information other than (a) to such Lender's employees, representatives, directors, attorneys, auditors, agents, professional advisors, trustees or affiliates who are advised of the confidential nature thereof or to any direct or indirect contractual counterparty in swap agreements or such contractual counterparty's professional advisor (so long as such contractual counterparty or professional advisor to such contractual counterparty agrees to be bound by the provision of this Section 12.11, such Lender being liable for any breach of confidentiality by any Person described in this clause (a) and with respect to disclosures to Affiliates to the extent disclosed by such Lender to such Affiliate), (b) to the extent such information presently is or hereafter becomes available to such Lender on a non-confidential basis from a Person not an Affiliate of such Lender not known to such Lender to be violating a confidentiality obligation by such disclosure, (c) to the extent disclosure is required by any Law, subpoena or judicial order or process (PROVIDED that notice of such requirement or order shall be promptly furnished to Borrower unless such notice is legally prohibited) or requested or required by bank, securities, insurance or investment company regulations or auditors or any administrative body or commission (including the Securities Valuation Office of the NAIC) to whose jurisdiction such Lender may be subject, (d) to any rating agency to the extent required in connection with any rating to be assigned to such Lender, (e) to assignees or participants or prospective assignees or participants who agree to be bound by the provisions of this Section 12.11, (f) to the ex- -127- tent required in connection with any litigation between any Obligor and any Creditor with respect to the Loans or any Credit Document or (g) with Borrower's prior written consent. 12.12. INDEPENDENCE OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations, warranties and covenants contained herein shall be independent of each other and no exception to any representation, warranty or covenant shall be deemed to be an exception to any other representation, warranty or covenant contained herein unless expressly provided, nor shall any such exception be deemed to permit any action or omission that would be in contravention of applicable law. 12.13. SEVERABILITY. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall 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. [Signature Pages Follow] S-1 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. NASSAU BROADCASTING I, LLC By: Nassau Broadcasting Partners, L.P., its sole member By: Nassau Broadcasting Partners, Inc., its general partner By: /s/ Louis F. Mercatanti, Jr. ----------------------------------- Name: Louis F. Mercatanti, Jr. Title: President Address for Notices: c/o Nassau Broadcasting Partners, L.P. 619 Alexander Road Princeton, New Jersey 08540 Contact Person: Michael S. Libretti Telecopier No.: (609) 452-6017 Telephone No.: (609) 452-9696 ext. 202 S-2 GUARANTORS: NASSAU BROADCASTING PARTNERS, L.P. By: Nassau Broadcasting Partners, Inc., its general partner By: /s/ Louis F. Mercatanti, Jr. ----------------------------------- Name: Louis F. Mercatanti, Jr. Title: President Nassau Broadcasting II, LLC By: Nassau Broadcasting I, LLC, its sole member By: Nassau Broadcasting Partners, L.P., its sole member By: Nassau Broadcasting Partners, Inc., its general partner By: /s/ Louis F. Mercatanti, Jr. ----------------------------------- Name: Louis F. Mercatanti, Jr. Title: President S-3 MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as Lead Arranger and Syndication Agent By: /s/ Dennis J. Dee ----------------------------------- Name: Dennis J. Dee Title: Vice President Address for Notices: World Financial Center c/o Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated South Tower 225 Liberty Street New York, New York 10080-6114 Attention: Paul Fox Telecopier No.: (212) 738-1649 Telephone No.: (212) 449-9579 S-4 PNC Bank, National Association, as Administrative Agent By: /s/ Steven J. McGehrin ----------------------------------- Name: Steven J. McGehrin Title: Vice President Address for Notices: PNC Bank, National Association 1600 Market Street 21st Floor Philadelphia, PA 19103 Attention: Steven J. McGehrin Telecopier No.: 215-585-6680 Telephone No.: 215-585-6269 S-5 The Bank of Nova Scotia, as Documentation Agent By: /s/ Vincent J. Fitzgerald, Jr. ----------------------------------- Name: Vincent J. Fitzgerald, Jr. Title: Authorized Signatory Address for Notices: The Bank of Nova Scotia 1 Liberty Plaza New York, NY 10006 Attention: Victor Chevallier Telecopier No.: (212) 225-5145 Telephone No.: (212) 225-5064 S-6 LENDERS MERRILL LYNCH CAPITAL CORPORATION, as a Lender By: /s/ Dennis J. Dee ----------------------------------- Name: Dennis J. Dee Title: Vice President Lending Office for all Loans: World Financial Center c/o Merrill Lynch & Co. North Tower - 7th Floor 250 Vesey Street New York, New York 10281-1307 Address for Notices: World Financial Center c/o Merrill Lynch & Co. North Tower 250 Vesey Street New York, New York 10281-1316 Attention: Paul Fox Telecopier No.: (212) 738-1649 Telephone No.: (212) 449-9579 S-7 PNC BANK, NATIONAL ASSOCIATION, as a Lender By: /s/ Steven J. McGehrin ----------------------------------- Name: Steven J. McGehrin Title: Vice President Lending Office for all Loans: PNC Bank, National Association One PNC Plaza 22nd Floor 249 Fifth Avenue Pittsburgh, PA 15222 Attention: Lisa Pierce Telecopier No.: 412-762-8672 Telephone No.: 412-762-6442 Address for Notices: PNC Bank, National Association 1600 Market Street 21st Floor Philadelphia, PA 19103 Attention: Steven J. McGehrin Telecopier No.: 215-585-6680 Telephone No.: 215-585-6269 S-8 THE BANK OF NOVA SCOTIA, as a Lender By: /s/ Vincent J. Fitzgerald, Jr. ----------------------------------- Name: Vincent J. Fitzgerald, Jr. Title: Authorized Signatory Lending Office for all Loans: The Bank of Nova Scotia 1 Liberty Plaza New York, NY 10006 Attention: Brenda S. Insull Telecopier No.: (212) 225-5090/5091 Address for Notices: The Bank of Nova Scotia 1 Liberty Plaza New York, NY 10006 Attention: Victor Chevallier Telecopier No.: (212) 225-5145 Telephone No.: (212) 225-5064 S-9 BANK OF MONTREAL, as a Lender By: /s/ Ola Anderssen ----------------------------------- Name: Ola Anderssen Title: Director Lending Office for all Loans: Bank of Montreal 430 Park Avenue New York, NY 60603 Attention: Josie Nichols Telecopier No.: (312)750-4304 Address for Notices: Bank of Montreal 430 Park Avenue New York, NY 60603 Attention: Bin Hu Telecopier No.: (212)605-1648 Telephone No.: (222)605-1443 S-10 THE BANK OF NEW YORK, as a Lender By: /s/ Steven J. Correll ----------------------------------- Name: Steven J. Correll Title: Assistant Vice President Lending Office for all Loans: Attention: Telecopier No.: Address for Notices: Attention: Telecopier No.: Telephone No.: S-11 FRANKLIN FLOATING RATE TRUST, as a Lender By: /s/ Chauncey Lufkin ----------------------------------- Name: Chauncey Lufkin Title: Vice President Lending Office for all Loans: Attention: Richard Hsu Telecopier No.: 650-312-3346 Address for Notices: 777 Mariners Island Blvd. San Mateo, CA 94404 Attention: Kirk Wallace Telecopier No.: 650-312-3346 Telephone No.: 650-312-3941 S-12 MORGAN STANLEY DEAN WITTER PRIME IN- COME TRUST, as a Lender By: /s/ Peter Gewirtz ----------------------------------- Name: Peter Gewirtz Title: Vice President Lending Office for all Loans: Morgan Stanley Dean Witter Prime Income Trust c/o Morgan Stanley Dean Witter Advisors Two World Trade Center, 72nd Floor NY, NY 10048 Attention: Kevin Egan Telecopier No.: (212) 392-5345 Address for Notices: Morgan Stanley Dean Witter Prime Income Trust c/o Morgan Stanley Dean Witter Advisors Two World Trade Center, 72nd Floor NY, NY 10048 Attention: Liz Bodisch Telecopier No.: (212) 392-5345 Telephone No.: (212) 392-0539 S-13 WEBSTER BANK, as a Lender By: /s/ Barbara F. Hillmeyer ----------------------------------- Name: Barbara F. Hillmeyer Title: Vice President Lending Office for all Loans: Attention: Telecopier No.: Address for Notices: Attention: Telecopier No.: Telephone No.: EX-10.1 16 0016.txt TIME BROKERAGE AGMT, DTD 7/1/1996 Exhibit 10.1 TIME BROKERAGE AGREEMENT Time Brokerage Agreement (the "Agreement") dated as of July 1,1996, by and among North Shore Broadcasting Corporation ("North Shore") and Seashore Broadcasting Corporation ("Seashore"), both New Jersey corporations (hereinafter referred to as "Licensees") and Nassau Broadcasting Partners, L.P., a Delaware Limited Partnership (the "Broker"). WITNESSETH: WHEREAS, North Shore is authorized to operate Radio Station WOBM (AM), licensed to Lakewood, New Jersey, and Seashore is authorized to operate Radio Station WOBM (FM), licensed to Toms River, New Jersey (hereinafter collectively referred to as the "Stations"), pursuant to licenses issued by the Federal Communications Commission ("FCC"); WHEREAS, all owners of the issued and outstanding shares of the capital stock of the Licensees (the "Shareholders") and Broker have entered into a Stock Purchase Agreement, dated of even date herewith (the "Purchase Agreement"), pursuant to which the Shareholders have agreed to sell to Broker all such shares of capital stock of the Licensees (the "Shares"); WHEREAS, the parties hereto have carefully considered the FCC's time brokerage policies and intend that this Agreement in all respects comply with such policies; WHEREAS, Licensees desire to enter into this Agreement to provide an interim source of diverse programming and income to sustain the operations of the Stations until the Closing under the Purchase Agreement; WHEREAS, Broker desires to provide an over-the-air program Service to Monmouth and Ocean Counties, New Jersey, using the facilities of the Stations; WHEREAS, Licensees agree to provide time on the Stations to Broker on terms and conditions that conform to the policies of the Stations and the FCC for time brokerage arrangements and as set forth herein; and WHEREAS, Broker agrees to utilize the facilities of the Stations solely to broadcast programming that conforms with the policies of the Licensees and with all rules, regulations and policies of the FCC and as set forth herein. NOW, THEREFORE, for and in consideration of the mutual covenants herein contained, the parties hereto have agreed and do agree as follows: 1. Facilities. Licensees agree to make broadcasting transmission facilities of each of the Stations available to Broker for a minimum of 158 hours per week (the "Minimum"), which will facilitate the broadcasting of Broker's programs (the "Programs"), which shall originate either from Broker's own studios or from Licensees' facilities or from other studios contracted for by Broker. The Programs are described in Attachment I hereto; provided, however, that the facilities made available to Broker shall not include the Stations' subcarrier(s) as long as it does not interfere with the principal signal. Licensees retain all rights to lease its subcarrier(s); provided, however, that any lease entered into by Licensees shall be terminable by Licensees upon thirty (30) days notice. Broker and Licensees represent to each other that they have, and will have throughout the term of this Agreement, the capability of transmitting either by STL or phone lines from their respective broadcast and transmission studios. 2 2. Payments. The compensation to be paid to Licensees for the broadcasting time shall be the reimbursement of Licensees' expenses as set forth in Paragraphs 8 and 9, commencing with July 1, 1996 (the "Effective Date"). The failure of Licensees to demand or insist upon prompt payment in accordance herewith shall not constitute a waiver of its right to such payment. Licensee shall pay Broker for any programming, up to the Minimum, produced by it and not broadcast by the Stations, such amount to be determined by multiplying the Fixed Stow Payments (as defined in the Purchase Agreement) by the ratio of the amount of time preempted or not accepted to the total number of broadcast hours up to the Minimum produced by Broker each month. 3. Term. This Agreement shall become effective as of the Effective Date and shall terminate upon the earlier of (a) the Closing Date (as that term is defined in the Purchase Agreement) or (b) the time for termination specified in this Agreement. 4. Programs. Broker shall furnish or cause to be furnished the artistic personnel and material for the Programs as provided by this Agreement and all Programs shall be in good taste and in accordance with the rules, regulations and policies of the FCC. All Programs shall be prepared and presented in conformity with the regulations prescribed in Attachment III hereto. All advertising spots and promotional material or announcements shall comply with all applicable federal, state and local regulations and policies. 5. Stations Facilities. 5.1 Operation of Station. Licensees represent that the Stations now operate and will continue to operate in accordance with the authorizations issued by the 3 FCC. Throughout the term of this Agreement, Licensees shall make the Stations available to the Broker for operation with the maximum authorized facilities twenty-four (24) hours a day, seven (7) days a week, except for: (i) up to ten (10) hours per week for public affairs, news, information and other non-entertainment programming intended to address the needs and interests of the Stations' service area; (ii) down-time occasioned by routine maintenance not to exceed two (2) hours each Sunday morning between the hours of 12 Midnight and 6:00 a.m. Any routine maintenance work affecting the operation of the Stations at full power shall be scheduled upon, if practicable, at least forty-eight (48) hours prior notice to Broker; and (iii) STL and phone lines as set forth in Paragraph 1 hereof. 5.2 Interruption of Normal Operations. If any of the Stations suffer loss or damage of any nature to their transmission facilities which results in the interruption of service or the inability of any of the Stations to operate with their maximum authorized facilities, pursuant to the authorization under which the Stations are then operating, Licensees shall immediately notify Broker and shall undertake such repairs as necessary to restore the full-time operation of the Stations with their then maximum authorized facilities within thirty (30) days from the occurrence of such loss or damage. If such repairs are not made within the allotted period, Broker may give notice to Licensees of Broker's intention to terminate this Agreement and the Purchase Agreement, in which event this Agreement and the Purchase Agreement shall terminate on the thirtieth (30) day following such notice, any other provision of this Agreement notwithstanding unless the repairs are made prior to the expiration of said thirty (30) day period. 4 6. Handling of Mail. Except as required to comply with the FCC rules and policies, including those regarding the maintenance of the public inspection file (which shall at all times remain the responsibility of Licensees), Licensees shall not be required to receive or handle mail, cables, telegraph or telephone calls in connection with the Programs broadcast hereunder unless Licensees have agreed in writing to do so. 7. Programming and Operations Standards. Broker agrees to abide by the standards set forth in this Attachment III hereto in its programming and operations. Broker further agrees that if, in the sole judgment of Licensees, or the Stations' General Manager, Broker does not comply with said standards, Licensees, or either of them, may suspend or cancel any program not in compliance. 8. Responsibility for Employees and Expenses. Broker shall employ and be responsible for the salaries, taxes, insurance and related costs for all personnel used in the production of its programming (including salespeople, traffic personnel, board operators and programming staff). Licensees will provide and be responsible for the Stations' personnel necessary for the broadcast transmission of the Programs (including, without limitation, a full-time Station Manager) and will be responsible for the salaries, taxes, insurance and related costs for all the Stations' personnel used in the broadcast transmission of the Programs. Whenever on the Stations' premises, all personnel shall be subject to the supervision and the direction of Licensees' Station Manager. Broker shall reimburse Licensee for the salary, taxes, insurance and related costs for the Licensees' Station Manager(s), all telephone calls associated with program production and listener responses, for all fees to ASCAP, BMI and SESAC, 5 and for any other copyright fees attributable to its programming broadcast on the Stations. 9. Treatment of Licensees' Revenues. Broker shall retain all Licensees' revenues received on the Effective Date and during the term of this Agreement and shall reimburse Licensee for all expenses related to the operation of the Stations, including but not limited to insurance premiums, real estates taxes, maintenance and repair of real and personal property of Licensee ("Accounts Payable"), except for principal payments due on the Mortgage to Fleet. Licensees shall cooperate with Broker in order to ensure Broker receives all such revenues, including executing all assignments and other instruments necessary to insure such receipt. To the extent Accounts Payable exceed accounts receivable from the sale of advertising time on the Stations as of the date of this Agreement, Licensee shall pay Broker the difference between such amounts within fifteen (15) days. 10. Control of Station. Notwithstanding anything to the contrary in this Agreement, Licensees shall have full authority and power over the operations of the Stations during the period of this Agreement Licensees shall provide and pay for the Manager(s) of the Stations, who shall report and be accountable solely to Licensees and who shall direct the day-to-day operation of the Stations. Licensees shall retain control, said control to be reasonably exercised, over the policies, programming and operations of the Stations, including, without limitation, the right to decide whether to accept or reject any programming or advertisements, the right to preempt any Programs in order to broadcast a program deemed by Licensees to be of greater national, regional or local interest, and the right to take any other actions necessary for 6 compliance with the laws of the United States, the State of New Jersey, the rules, regulations and policies of the FCC, and the rules, regulations and policies of other federal governmental authorities, including the Federal Trade Commission and the Department of Justice. Licensees and Broker shall cooperate with one another in meeting all of the FCC's requirements with respect to public service programming, for maintaining the political and public inspection files of each of the Stations' logs and for the preparation of issues/Programs lists. Broker shall, upon request by Licensees, provide Licensees with information with respect to such of the Programs which are responsive to public needs and interest so as to assist Licensees in the preparation of required programming reports and will provide, upon request, other information to enable Licensees to prepare other records, reports and logs required by the FCC or other local, state or federal governmental agencies. 11. Special Events. Licensees reserve the right, to preempt any of the broadcasts of the Programs referred to herein and to use part or all of the time contracted for herein by Broker to broadcast special events of importance. In all such cases, Licensees will use their best efforts to give Broker reasonable notice of their intention to preempt such broadcast or broadcasts and, in the event of such preemption, Broker shall receive a payment credit for the broadcasts so omitted. In addition, Licensees shall be responsible for insuring that each of the Stations' identification announcements are broadcast in accordance with FCC requirements, and Broker shall cooperate with Licensees to facilitate such broadcasts. 12. Force Majeure. Any failure or impairment of facilities or any delay or interruption in broadcasting Programs or failure at any time to furnish facilities, in whole 7 or in part, for broadcasting due to acts of God, strikes, or threats thereof, force majeure, or due to causes beyond the control of Licensees, shall not constitute a breach of this Agreement, and Licensees will not be liable to Broker. 13. Right to Use the Programs. The right to use the Programs produced by Broker and to authorize their use in any manner and in any media whatsoever shall be and remain vested in Broker. 14. Payola. Broker agrees that neither it nor any of its employees or agents will accept any compensation or any kind of gift or gratuity of any kind whatsoever, regardless of its value or form, including, but not limited to, a commission, discount, bonus, materials, supplies or other merchandise, services or labor, whether or not pursuant to written contracts or agreements between them and merchants or advertisers, unless, to the extent required by the FCC, the payer is identified in the program as having paid for or furnished such consideration. Broker agrees annually, or more frequently upon the request of Licensees, to provide Licensees with Payola Affidavits substantially in the form attached hereto as Attachment IV. 15. Compliance with Law. Broker agrees that, throughout the term of this Agreement, Broker will materially comply with all laws and regulations applicable in the conduct of Licensees' business, and Broker acknowledges that Licensees have not urged, counseled or advised the use of any unfair business practice. 16. Political Advertising. Broker shall cooperate with Licensees as Licensees comply with the political broadcasting requirements of the Federal Communications Act of 1934, as amended (the "Act") and the FCC's rules and policies thereunder. Broker shall supply such information promptly to Licensees as may be 8 necessary to comply with the lowest unit charge requirements of Section 315 of the Act. To the extent that Licensees believe necessary, in Licensees sole discretion, Broker shall release advertising availabilities to Licensees to permit them to comply with its reasonable access provisions of Section 312(a)(7) of the Act, the equal opportunities provision of Section 315 of the Act, and the rules and policies of the FCC thereunder; provided, however, that all revenues realized by Licensees as a result of such a release of advertising time shall promptly be remitted to Broker. In any event, with respect to the Stations, Licensees must oversee and take ultimate responsibility with respect to the provision of equal opportunities, lowest unit charge, and reasonable access to political candidates, and compliance with the political broadcast rules and policies of the FCC. 17. Indemnification; Warranty. Broker will indemnify and hold Licensees, or either of them, harmless against all liability for its material breach of representations, warranties or covenants as well as for libel, slander, illegal competition or trade practice, infringement of trademarks, trade names or program titles, violation of rights of privacy, and infringement of copyrights and proprietary rights resulting from the broadcast of Programs furnished by Broker. Further, Broker warrants that the broadcasting of the Programs will not violate any rights of others, and Broker agrees to hold Licensees harmless from any and all claims, damages, liability, costs and expenses, including reasonable attorneys' fees, arising from the broadcasting of the Programs. Licensees reserve the right to refuse to broadcast any Programs containing matter which is or, in the reasonable opinion of Licensees, may be, or which a third-party claims to be, violative of any right of Licensees or which may constitute a personal 9 attack as the term is and has been defined by the Commission. Broker's obligation to hold Licensees harmless against the liabilities specified above shall survive any termination of this Agreement until the expiration of all applicable statutes of limitation. Reciprocally, Licensees, or either of them, shall indemnify and hold Broker harmless against all liability for their material breach of representations, warranties or covenants as well as for libel, slander, illegal competition or trade practices, infringement or trademarks, trade names or program titles, violations of rights of privacy and infringement of copyrights and proprietary rights resulting from programming furnished by Licensees. Further, Licensees warrant that the broadcasting of the Programs will not violate any rights of others, and Licensees agree to hold Broker harmless for any loss, damage or injury or any kind (including reasonable legal fees and related costs) arising from the broadcast of programming on the Stations furnished by Licensees. Licensees' obligation to' hold Broker harmless against the liabilities specified above shall survive any termination of this Agreement until the expiration of the applicable statute of limitations. 18. Events of Default; Cure Periods and Remedies. 18.1 Events of Default. The following shall, after the expiration of the applicable cure periods, constitute Events of Default under the Agreement: 18.1.1 Non-Payment. Broker's failure to timely pay the consideration provided for in Paragraph 2 hereof; or 18.1.2 Default in Covenants or Adverse Legal Action. The default by either party hereto in the material observance or performance of any material covenant, condition or agreement contained herein or in the Purchase Agreement, or if 10 either party shall (a) make a general assignment for the benefit of creditors, (b) files or has filed against it a petition for bankruptcy, for reorganization or for the appointment of a receiver, trustee or similar creditors' representative for the property or assets of such party under any federal or state insolvency law, which, if filed against such party, has not been dismissed or discharged within sixty (60) days thereof; or 18.1.3 Breach of Representation. If any material representation or warranty herein made by either party hereto or in any certificate or document furnished by either party to the other pursuant to the provisions hereof shall prove to have been false or misleading in any material respect as of the time made or furnished; or 18.1.4 Substitution of Programming. If other than the hours described in Section 5.1(i) hereof, Licensees preempt or substitute other programming for that supplied by Broker during five and one-half (5.5%) percent or more of the total hours of operation of each of the Stations during any calendar month. 18.2 Cure Periods. An Event of Default shall not be deemed to have occurred until twenty-five (25) business days, or fifteen (15) days in the event of a monetary default, after the non-defaulting party has provided the defaulting party with written notice specifying the event or events that, if not cured, would constitute an Event of Default and specifying the actions necessary to cure within such period. This period may be extended for a reasonable period of time if the defaulting party is acting in good faith to cure and such delay is not materially adverse to the other party. 18.3 Termination Upon Default. In the event of the occurrence of an Event of Default pursuant to this Agreement or the Purchase Agreement, the non- 11 defaulting party may terminate this Agreement and/or the Purchase Agreement after any relevant cure period provided herein or therein if that party is not also in material default pursuant to this Agreement or the Purchase Agreement. If Licensees terminate this Agreement because Broker has defaulted in the performance of its obligations under this Agreement or the Purchase Agreement, Licensees shall be under no further obligation to make available to Broker any further broadcast time or broadcast transmission facilities and all amounts accrued or payable to Licensees up to the date of termination which have not been paid, less any payments made on behalf of Licensees by Broker and any payment credits, shall immediately become due and payable. 18.4 Liabilities Upon Termination. Broker shall be responsible for all liabilities, debts and obligations of Broker accrued from the purchase of air time and use of transmission facilities, including, without limitation, Broker's accounts payable, barter agreements and unaired advertisements, but not for Licensees' federal, state and local tax liabilities associated with Broker's payments to Licensees as provided herein. With respect to Broker's obligations for consideration in the form of air time, Broker may propose compensation to Licensees for meeting these obligations, but Licensees shall be under no duty to accept such compensation or to perform such obligations. 19. Termination Upon Order of Governmental Authority. The parties intend that this Agreement shall comply with all applicable federal, state and local regulations. In the event that a federal, state or local governmental authority designates a hearing with respect to the continuation or renewal of any licenses, 12 permits or authorizations held by Licensees for the operation of each of the Stations or orders the termination of this Agreement and/or the curtailment in any manner material to the relationship between the parties hereto of the provision of programming by Broker hereunder, Broker, at its option, may seek administrative or judicial appeal of or relief from such order(s) (in which event Licensees shall cooperate with Broker provided that Broker shall be responsible for legal fees incurred in such proceedings) or Broker shall notify Licensees that they will terminate this Agreement in accordance with such order(s). If the FCC designates any renewal application of the Stations for a hearing or commences a hearing to consider revocation of any license or permit for the Stations as a consequence of this Agreement or for any reason other than the fault of Broker, Licensees shall be responsible for expenses they incur as a consequence of the FCC proceeding; provided, however, that Broker shall cooperate and comply with any reasonable request of Licensees to assemble and provide to the FCC information relating to Broker's performance under this Agreement. In the event of termination upon such governmental order(s), Broker shall pay to Licensees any fees due but unpaid as of the date of termination unless prohibited by such order(s) and Licensees shall reasonably cooperate with Broker to the extent permitted to enable Broker to fulfill advertising or other programming contracts then outstanding, in which event Licensees shall receive as compensation for such advertising or programming that which otherwise would have been paid to Broker thereunder. Thereafter, neither party shall have any liability to the other under the Agreement except as may be provided pursuant to Paragraph 16 hereof. 13 20. Representations and Warranties. 20.1 Mutual Representations and Warranties. Licensees and Broker represent that they are legally qualified, empowered and able to enter into this Agreement, and that the execution, delivery and performance hereof shall not constitute a breach or violation of any agreement, contract or undertaking to which any party is subject or by which it is bound. Licensees and Broker warrant, represent, covenant and certify that Licensees maintain, and shall continue to maintain, ultimate control over each of the Stations' facilities during the term of this Agreement, including, without limitation, control over each of the Stations' finances, personnel and programming. Licensees and Broker represent and warrant that they have taken all necessary corporate and other action to make this Agreement legally binding on such party, and that the individuals signing this Agreement on their behalf have been fully authorized and empowered to execute this Agreement. 20.2 Licensees' Representations, Warranties and Covenants. Licensees makes the following further representations, warranties and covenants: 1. Authorizations. Licensees hold and own all licenses and other permits and authorizations necessary for the operation of each of the Stations as presently conducted (including licenses, permits and authorizations issued by the FCC), and such licenses, permits and authorizations will be in full force and effect for the entire term hereof, unimpaired by any acts or omissions of Licensees or of any of their principals, employees, or agents. 2. Litigation. Except as set forth in Schedule 4(g) of the Purchase Agreement, there is not now pending or, to the knowledge of Licensees, or 14 either of them, threatened, any action by the FCC or any other party to revoke, cancel, suspend, refuse to renew or modify adversely, any of the licenses, permits or authorizations necessary to the operation of each of the Stations (other than proceedings of general applicability to the radio broadcast industry). Licensees, or either of them, have no reason to believe that any such license, permit or authorization will not be renewed in its ordinary course. 20.3 Brokers Representations, Warranties and Covenants. The Broker hereby verifies that the arrangement contemplated by this Agreement complies with the ownership limitations set forth in the Telecommunications Act of 1996, as adopted February 8,1996. 21. FCC Compliance. Notwithstanding anything herein contained to the contrary, this Agreement, any related agreements and the parties' performance hereunder and thereunder (i) do not and will not constitute, create, or have the effect of constituting or creating, directly or indirectly, actual or practical ownership of Licensees or any of the Stations by Broker or control, affirmative or negative, direct or indirect, by the Broker over the programming, management, or any other aspect of the operation of the Licensees or any of the Stations, which ownership and control will remain exclusively and at all times in the Licensees; and (ii) do not and will not constitute the transfer, assignment, or disposition in any manner, voluntarily or involuntarily, directly or indirectly, of any license or permit at any time issued by the FCC to the Licensees or the transfer of control of the Licensees within the meaning of Section 310(d) of the Act, without the FCC's necessary prior written consent having been obtained. 15 22. Modification and Waiver. No modification or waiver of any provision of this Agreement shall in any event be effected unless the same shall be in writing and signed by the party adversely affected by the waiver or modification, and then such waiver and consent shall be effective only in the specific instance and for the purpose for which given. 23. No Waiver; Remedies Cumulative. No failure or delay on the part of Licensees or Broker in exercising any right or power hereunder shall operate as a I waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of Licensees and Broker herein provided are cumulative and are not exclusive of any right or remedies which they may otherwise have. 24. Construction. This Agreement shall be construed in accordance with the laws of the State of New Jersey, and the obligations of the parties hereto are subject to all federal, state or municipal laws or regulations now or hereafter in force and to the regulations of the FCC and all other governmental bodies or authorities presently or hereafter to be constituted. 25. Headings. The headings contained in this Agreement are included for convenience only and no such heading shall in any way alter the meaning of any provision. 26. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including, without limitation, any assignee of the Licensees for the FCC licenses for the 16 Stations. Licensees and Broker shall not be permitted to assign this Agreement without obtaining the consent of the other party, which consent may be withheld for any reason whatsoever. 27. Counterpart Signatures. This Agreement may be signed in one or more counterparts, each of which shall be deemed a duplicate original, binding on the parties hereto notwithstanding that the parties are not signatory to the original or the same counterpart. 28. Notices. Any notice required hereunder shall be in writing and any payment, notice or other communications shall be deemed given when delivered personally or mailed by certified mail or Federal Express, postage prepaid, with return receipt requested, and addressed In accordance with the listing set forth in Attachment V hereto. If mailed, notice shall be deemed given three (3) days after it is mailed. 29. Entire Agreement. This Agreement, which includes the attached Exhibits and Schedules and the Purchase Agreement, embodies the entire agreement between the parties and there are no other agreements, representations, warranties or understandings, oral or written, between them with respect to the subject matter hereof. No alterations, modification or change of this Agreement shall be valid unless by like written instrument. 30. No Partnership or Joint Venture Created. Nothing in this Agreement shall be construed to make Licensees and Broker partners or joint venturers of the other. None of the parties hereto shall have the right to bind the others to transact any business in the other's name or on its behalf, in any form or manner or to make any 17 promises or representations on behalf of the other except as expressly provided for herein. 31. Severability. In the event that any of the provisions contained in this Agreement are held to be invalid, illegal or unenforceable it shall not affect any other provision hereof and this Agreement shall be construed as if such invalid, illegal or unenforceable provisions had not been contained herein. 18 IN WITNESS WHEREOF, the parties hays executed this Agreement as of the date first above written. NORTH SHORE BROADCASTING CORPORATION By: /s/ Roy G. Simmons ------------------------------------- Roy G. Simmons SEASHORE BROADCASTING CORPORATION By: /s/ Roy G. Simmons ------------------------------------- Roy G. Simmons NASSAU BROADCASTING PARTNERS, L.P. By: Nassau Broadcasting Holdings, Inc., Its general partner By: /s/ Louis F. Mercatanti, Jr. ------------------------------------- Louis F. Mercatanti, Jr., President 19 TIME BROKERAGE AGREEMENT ATTACHMENT I Broker will broadcast an adult contemporary entertainment format which may include news as well as promotions (including on-air giveaways) and contests. Programming provided by Broker may include commercial matter, including that in both program or spot announcement forms, as well as entertainment and public service programming. 21 TIME BROKERAGE AGREEMENT ATTACHMENT II INTENTIONALLY BLANK 22 TIME BROKERAGE AGREEMENT ATTACHMENT III Broker agrees to cooperate with Licensees in the broadcasting of Programs of the highest possible standard of excellence and for this purpose to observe the following regulations in the preparation, writing and broadcasting of its Programs: I. Respectful of Faiths. The subject of religion and references to particular faiths, tenets and customs shall be treated with respect at all times. II. No Denominational Attacks. Programs shall not be used as a medium for attack on any faith, denomination or sect or upon any individual or organization. III. Controversial Issues. Any discussion of controversial issues of public importance shall be reasonably balanced with the presentation of contrasting viewpoints in the course of overall programming; no attacks on the honesty, integrity or like personal qualities of any person or group of persons shall be made during the discussion of controversial issues of public importance; and during the course of political campaigns, Programs are not to be used as a forum for editorializing about individual candidates. If such events occur, Licensees may require that responsive programming be aired. IV. Donation Solicitation. Requests for donations in the form of a specific amount, for example, $1.00 to $5.00, shall not be made if there is any suggestion that such donation will result in miracles, cures or prosperity. However, statements generally requesting donations to support the broadcast or church may be permitted. 23 V. No Ministerial Solicitations. No invitations by a minister or other individual appearing on the program to have listeners come and visit him or her for consultation or the like shall be made if such invitation implies that the listeners will receive consideration, monetary gain or cures for illness. VI. No Vending of Miracles. Any exhortation to listeners to bring money to a church affair or service is prohibited if the exhortation, affair or service contains any suggestion that miracles, cures or prosperity will result. VII. Sale of Religious Artifacts. The offering for sale of religious artifacts or other items for which listeners would send money is prohibited unless such items are readily available in ordinary commerce or are clearly being sold for legitimate fundraising purposes. VIII. No Miracle Solicitation. Any invitations to listeners to meet at places other than the church and/or to attend other than regular services of the church is prohibited if the invitation, meeting or service contains any claim that miracles, cures or prosperity will result. IX. No Claims of Undocumented Miracles. Any claims of miracles or cures not documented in biblical scripture and quoted in context are prohibited; e.g., this prohibits the minister and/or other individual appearing on the program from personally claiming any cures or miracles and also prohibits the presentation of any testimonials regarding such claims, either in person or in writing. 24 X. No Plugola or Payola. The mention of any business activity or "plug" for any commercial, professional or other related endeavor, except where contained in an actual commercial message of a sponsor, is prohibited. XI. No Lotteries. Announcements giving any information about lotteries or games prohibited by federal or state law or regulation are prohibited. XII. No "Dream Books". References to "dream books", the "straight line" or other direct or indirect descriptions or solicitations relative to the "numbers game" or the "policy game" or any other form of gambling are prohibited. XIII. No Numbers Games. References to chapter and verse numbers, paragraph numbers or song numbers which involve three (3) digits should be avoided and, when used, must relate to the overall theme of the program. XIV. Election Procedures. At least ninety (90) days before the start of any primary or regular election campaign, Broker will clear with Licensees' General Manager the rate Broker will charge for the time to be sold to candidates for public office and/or their supporters to make certain that the rate charged conforms to all applicable laws and Station policy. XV. Spot Commercial Limitations. With respect to any given segment of air time hereunder, the amount of spot commercial matter shall not exceed twenty (20) minutes during any sixty (60) minute segment. Broker will provide, for attachment to each of the Stations' logs, a list of all commercial announcements carried during its programming, 25 XVI. Required Announcements. Broker shall broadcast (i) an announcement in a form satisfactory to Licensees at the beginning of each hour to identify Station call letters, (ii) an announcement at the beginning and end of each program and hourly, as appropriate, to indicate that program time has been purchased by Broker; and (iii) any other announcement that may be required by law, regulation or Station policy. XVII. Credit Terms Advertising. Pursuant to rules of the Federal Trade Commission, no advertising of credit terms shall be made over the Station beyond mention of the fact that, if desired, credit terms are available. XVIII. Commercial Recordkeeping. Broker shall not receive any consideration in violation of the FCC's sponsorship identification rule and the anti-payola provisions of the Communications Act. No commercial messages ("plugs") or undue references shall be made in programming presented over each of the Stations to any business venture, profit-making activity, or other interest (other than non-commercial announcements for bona fide. charities, church activities or other public service activities) in which Broker (or anyone else) is directly or indirectly interested without the same having been approved in advance by Licensees' General Managers and such broadcast being announced and logged and sponsored. XIX. No Illegal Announcements. No announcements or promotion prohibited by federal or state law or regulation of any lottery or game shall be made over each of the Stations. Any game, contest or promotion relating to or to be presented over the Stations must be fully stated and explained in advance to Licensees which reserves the right, in its sole discretion, to reject any game, contest or promotion. 26 XX. Programming Prohibitions. Broker shall not knowingly broadcast any of the following Programs or announcements: A. False Claims. False or unwarranted claims for any product or service. B. Unfair Imitation. Infringements of another advertiser's rights through plagiarism or unfair limitation or either program idea or copy, or any other unfair competition. C. Commercial Disparagement. Any disparagement of competitors or competitive goods. D. Profanity. Any Programs or announcements that are slanderous, obscene, profane, vulgar, repulsive or offensive, either in them or treatment. E. Price Disclosure. Any price mentions except as permitted by Licensees' policies current at the time. F. Descriptions of Bodily Functions. Any programming which describes in a repellent manner internal bodily functions or symptomatic results or internal disturbances. G. Unauthenticated Testimonials. Any testimonials which cannot be authenticated. H. Conflict Advertising. Any advertising matter or announcement which may, in the opinion of Licensees, be injurious or prejudicial to the interests of the public, each of the Stations, or honest advertising and reputable business in general. 27 Licensees, may waive any of the foregoing regulations in specific instances if, in its reasonable opinion, good broadcasting in the public interest will be served thereby. In any case where questions of policy or Interpretation arise, Broker shall submit the same to Licensees for decision before making any commitments in connection therewith. 28 TIME BROKERAGE AGREEMENT ATTACHMENT IV County of State of New Jersey ANTI-PAYOLA PLUGOLA AFFIDAVIT Louis F. Mercatanti, Jr., being first duly sworn, deposes and says as follows: 1. He is the President of the General Partner for Nassau Broadcasting Partners, L.P. ("Broker'). 2. He has acted in the above capacity since (date). 3. No matter has been provided for broadcast by Stations WOBM (AM) and WOBM (FM) (hereinafter collectively referred to as the "Stations"), for which service, money or other valuable consideration has been directly or indirectly paid, or promised to, or charged, or accepted, by him from any person, which matter at the time so broadcast has not been announced or otherwise indicated as paid for or furnished by such person. 4. So far as he is aware, no matter has been provided for broadcast by the Stations for which service, money or other valuable consideration has been directly or indirectly paid, or promised to, or charged, or accepted by the Stations by the Broker, or by any independent contractor engaged by the Broker in furnishing Programs, from any person, which matter at the time so broadcast has not been announced or otherwise indicated as paid for or furnished by such person. 29 5. In the future, he will not pay, promise to pay, request or receive any money or any other valuable consideration, direct or indirect, from a third-party in exchange for the influencing of, or the attempt to influence, the preparation or presentation of broadcast matter on the Stations. 6. Except as may be reflected in Paragraph 7 hereof, neither he, his spouse nor any member of his immediate family, has any present, direct or indirect, ownership interest In any entity engaged in the following business or activities (other than an investment in a corporation whose stock is publicly held), serves as an officer or director of, whether with or without compensation, or serves as an employee of, any entity engaged in the following business or activities: a. the publishing of music; b. the production, distribution (including wholesale and retail sales outlets), manufacture or exploitation of music, films, tapes, recordings or electrical transcriptions of any program material intended for radio broadcast use; c. the exploitation, promotion or management of persons rendering artistic, production and/or other services in the entertainment field; d. the ownership or operation of one or more radio or television stations; e. the wholesale or retail sale of records intended for public purchase; and f. the sale of advertising time other than on the Stations or any other station owned by the Broker. 30 7. A full disclosure of any such interest referred to in Paragraph 6 above is as follows: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________ Affiant Subscribed and sworn to before me this ___ day of ___________ , 1996 ________________________________ Notary Public My commission expires:________ 31 TIME BROKERAGE AGREEMENT ATTACHMENT V If the notice is to Licensees, to it at: North Shore Broadcasting Corporation Seashore Broadcasting Corporation P.O. Box 927 Toms River, New Jersey 08754 Attention: Joseph E. Buckelew with a copy to: Bathgate, Wegner & Wolf A Professional Corporation One Airport Road P.O. Box 2043 Lakewood, New Jersey 08701 Attention: Lawrence E. Bathgate, Esq. If the notice is to Broker: Nassau Broadcasting Partners, L.P. 600 Alexander Road Princeton, New Jersey 08540 Attention: Louis F. Mercatanti, Jr. with a copy to: Sterns & Weinroth A Professional Corporation 50 West State Street, Suite 1400 P.O. Box 1298 Trenton, New Jersey 08607-1298 Attention: Mark D. Schorr 32 EX-10.2 17 0017.txt TIME BROKERAGE AGMT, DTD 1/21/1999 Exhibit 10.2 TIME BROKERAGE AGREEMENT TIME BROKERAGE AGREEMENT (the "Agreement") dated as of January 21, 1999, by and between MULTICULTURAL RADIO BROADCASTING, INC. ("Multicultural") (hereinafter referred to as "Licensee") and NASSAU BROADCASTING PARTNERS, L.P., a Delaware Limited Partnership (the "Broker"). WITNESSETH: WHEREAS, Licensee is authorized to operate Radio Stations WJHR-AM licensed to Flemington, New Jersey (hereinafter referred to as the "Station") pursuant to a license issued by the Federal Communications Commission ("FCC"); WHEREAS, Contemporaneously with the execution of this Agreement, Licensee and Broker have entered into an Asset Purchase Agreement, dated even date herewtih (the Asset Purchase Agreement) pursuant to which the Licensee has agreed to sell to Broker all of the Stations' assets, including the License, subject to the approval of the FCC, at the expiration of this Agreement; WHEREAS, the parties hereto have carefully considered the FCC's time brokerage policies and intend that this Agreement in all respects comply with such policies; WHEREAS, Licensee desires to enter into this Agreement to provide an interim source of diverse programming and income to sustain the operations of the Station until the expiration of the Time Brokerage Agreement; WHEREAS, Broker desires to provide an over-the-air program service to Flemington, New Jersey and surrounding areas, using the facilities of the Station; 1 WHEREAS, Licensee agrees to provide time on the Station to Broker on terms and conditions that conform to the policies of the Station and the FCC for time brokerage arrangements and as set forth herein; and WHEREAS, Broker agrees to utilize the facilities of the Station solely to broadcast programming that conforms with the policies of the Licensee and with all rules, regulations and policies of the FCC and as set forth herein. NOW, THEREFORE, for and in consideration of the mutual covenants herein contained, the parties hereto have agreed and do agree as follows: 1 . FACILITIES. Licensee agrees to make broadcasting transmission facilities of the Station, including its subcarrier, available to Broker for a minimum of 158 hours per week (the "Minimum"), which will facilitate the broadcasting of Broker's programs (the "Programs"), which shall originate either from Broker's own studios or from Licensee's facilities or from other studios contracted for by Broker. The Programs are described in ATTACHMENT I hereto. Broker and Licensee represent to each other that they have, and will have throughout the term of this Agreement, the capability of transmitting either by STL or phone lines from their respective broadcast and transmission studios. 2. PAYMENTS. Broker hereby agrees to pay Licensee for the broadcast of the programs hereunder a fee in the amount of Two Hundred Thousand Dollars ($200,000) per annum, payable $50,000.00 quarterly, in advance, commencing on the Effective Date of this Agreement as provided in Section 3 below. 2 3. TERM. This Agreement shall become effective on the Effective Date defined herein and shall continue until November 16, 2001, or if earlier, the date of termination, pursuant to the provisions of Section 18.3 of this Agreement. a. EFFECTIVE DATE. This Agreement shall become effective on February 1, 1999. 4. PROGRAMS. Broker shall furnish or cause to be furnished the artistic personnel and material for the Programs as provided by this Agreement and all Programs shall be in good taste and in accordance with the rules, regulations and policies of the FCC. All Programs shall be prepared and presented in conformity with the regulations prescribed in ATTACHMENT II hereto. All advertising spots and promotional material or announcements shall comply with all applicable federal, state and local regulations and policies. 5. STATION'S FACILITIES. 5.1 OPERATION OF STATION. Licensee represents that the Station now operates and will continue to operate in accordance with the authorizations issued by the FCC. Throughout the term of this Agreement, Licensee shall make the Station available to the Broker for operation with the maximum authorized facilities twenty-four (24) hours a day, seven (7) days a week, except for: (i) up to ten (10) hours per week for public affairs, news, information and other non-entertainment programming intended to address the needs and interests of the Station's service area; (ii) down-time occasioned by routine maintenance not to exceed two (2) hours each Sunday morning between the hours of 12 Midnight and 6:00 a.m. Any routine maintenance work affecting the operation of the Stations at full power shall be scheduled upon, if 3 practicable, at least forty-eight (48) hours prior notice to Broker; and (iii) STL and phone lines as set forth in Paragraph 1 hereof. 5.2 INTERRUPTION OF NORMAL OPERATIONS. If the Station suffers loss or damage of any nature to their transmission facilities which results in the interruption of service or the inability of the Station to operate with its maximum authorized facilities, pursuant to the authorization under which the Station is then operating, Licensee shall immediately notify Broker and shall undertake such repairs as necessary to restore the full-time operation of the Station with its then maximum authorized facilities within thirty (30) days from the occurrence of such loss or damage. If such repairs are not made within the allotted period, Broker may give notice to Licensee of Broker's intention to terminate this Agreement and the Asset Purchase Agreement, in which event this Agreement and the Asset Purchase Agreement shall terminate on the thirtieth (30) day following Licensee's receipt of such notice, any other provision of this Agreement notwithstanding unless the repairs are made prior to the expiration of said thirty (30) day period. 6. HANDLING OF MAIL. Except as required to comply with the FCC rules and policies, including those regarding the maintenance of the public inspection file (which shall at all times remain the responsibility of Licensee), Licensee shall not be required to receive or handle mail, cables, telegraph or telephone calls in connection with the Programs broadcast hereunder unless Licensee has agreed in writing to do so. 7. PROGRAMMING AND OPERATIONS STANDARDS. Broker agrees to abide by the standards set forth in ATTACHMENT II hereto in its programming and operations. Broker further agrees that if, in the sole judgment of Licensee, or the Station's General 4 Manager, Broker does not comply with said standards, Licensee may suspend or cancel any program not in compliance. 8. RESPONSIBILITY FOR EMPLOYEES AND EXPENSES. 8.1 Broker shall employ and be responsible for the salaries, taxes, insurance and related costs for all personnel used in the production of its programming (including salespeople, traffic personnel, board operators and programming staff). Licensee will provide and be responsible for the Station's personnel necessary for the broadcast transmission of the Programs (including, without limitation, a full-time Station Manager) and will be responsible for the salaries, taxes, insurance and related costs for such Station personnel used in the broadcast transmission of the Programs. Whenever on the Station's premises, all personnel shall be subject to the supervision and the direction of Licensees' Station Manager. Broker shall reimburse Licensee for all telephone calls associated with program production and listener responses, for all fees to ASCAP, BMI and SESAC, and for any other copyright fees attributable to its programming broadcast on the Station. 8.2 PROGRAM TRANSMISSION COST AND MAINTENANCE. Broker shall be solely responsible, and shall directly pay or, if appropriate, reimburse Licensee for all expenses incurred in the organization and/or delivery of programming from any remote location and the main studios of the Station, including electric power at the Station's transmitter sites, and further shall be responsible for reimbursement of all maintenance, including all expenses related thereto, of the Station's transmitter antennae, towers, and equipment, used in conjunction with the broadcasting of programming, and 5 otherwise agrees to turn over all of such equipment to Licensee at the termination of this Agreement in good and working order, normal wear and tear excepted. 9. TREATMENT OF LICENSEE'S REVENUES. Licensee shall retain all of Licensee's revenues received on or before the Effective Date and shall be entitled to all accounts receivable produced on or before the Effective Date, and Broker shall cooperate with Licensee in the collection of the receivables, a true and correct list of which is attached hereto and marked ATTACHMENT III. Licensee shall be responsible for all accounts payable incurred by Licensee up to the Effective Date. 10. CONTROL OF STATION. Notwithstanding anything to the contrary in this Agreement, Licensee shall have full authority and power over the operations of the Station during the period of this Agreement, Licensee shall provide and pay for the Manager(s) of the Station, who shall report and be accountable solely to Licensee and who shall direct the day-to-day operation of the Station. Licensee shall retain control, said control to be reasonably exercised, over the policies, programming and operations of the Station, including, without limitation, the right to decide whether to accept or reject any programming or advertisements, the right to preempt any Programs in order to broadcast a program deemed by Licensee to be of greater national, regional or local interest, and the right to take any other actions necessary for compliance with the laws of the United States, the State of New Jersey, the rules, regulations and policies of the FCC, and the rules, regulations and policies of other federal governmental authorities, including the Federal Trade Commission and the Department of Justice. Licensee and Broker shall cooperate with one another in meeting all of the FCC's requirements with respect to public service programming, for maintaining the political and public 6 inspection files of each of the Station's logs and for the preparation of issues/program lists. Broker shall, upon request by Licensee, provide Licensee with information with respect to such of the Programs which are responsive to public needs and interest so as to assist Licensee in the preparation of required programming reports and will provide, upon request, other information to enable Licensee to prepare other records, reports and logs required by the FCC or other local, state or federal governmental agencies. 11. SPECIAL EVENTS. Licensee reserves the right, to preempt any of the broadcasts of the Programs referred to herein and to use part or all of the time contracted for herein by Broker to broadcast special events of importance. In all such cases, Licensee will use their best efforts to give Broker reasonable notice of their intention to preempt such broadcast or broadcasts and, in the event of such preemption, Broker shall receive a payment credit for the broadcasts so omitted. In addition, Licensee shall be responsible for insuring that the Station's identification announcements are broadcast in accordance with FCC requirements, and Broker shall cooperate with Licensee to facilitate such broadcasts. 12. FORCE MAJEURE. Any failure or impairment of facilities or any delay or interruption in broadcasting Programs or failure at any time to furnish facilities, in whole or in part, for broadcasting due to acts of God, strikes, or threats thereof, force MAJEURE, or due to causes beyond the control of Licensee, shall not constitute a breach of this Agreement, and Licensee will not be liable to Broker. 7 13. RIGHT TO USE THE PROGRAMS. The right to use the Programs produced by Broker and to authorize their use in any manner and in any media whatsoever shall be and remain vested in Broker. 14. PAYOLA. Broker agrees that neither it nor any of its employees or agents will accept any compensation or any kind of gift or gratuity of any kind whatsoever, regardless of its value or form, including, but not limited to, a commission, discount, bonus, materials, supplies or other merchandise, services or labor, whether or not pursuant to written contracts or agreements between them and merchants or advertisers, unless, to the extent required by the FCC, the payer is identified in the program as having paid -for or furnished such consideration. Broker agrees annually, or more frequently upon the request of Licensee, to provide Licensee with Payola Affidavits substantially in the form attached hereto as ATTACHMENT IV. 15. COMPLIANCE WITH LAW. Broker agrees that, throughout the term of this Agreement, Broker will materially comply with all laws and regulations applicable in the conduct of Licensee's business, and Broker acknowledges that Licensee has not urged, counseled or advised the use of any unfair business practice. 16. POLITICAL ADVERTISING. Broker shall cooperate with Licensee as Licensee complies with the political broadcasting requirements of the Federal Communications Act of 1934, as amended (the "Act") and the FCC's rules and policies thereunder. Broker shall supply such information promptly to Licensee as may be necessary to comply with the lowest unit charge requirements of Section 315 of the Act. To the extent that Licensee believes necessary, in Licensee's sole discretion, Broker shall release advertising availability's to Licensee to permit them to comply with its 8 reasonable access provisions of Section 312(a)(7) of the Act, the equal opportunities provision of Section 315 of the Act, and the rules and policies of the FCC thereunder; PROVIDED, HOWEVER, that all revenues realized by Licensee as a result of such a release of advertising time shall promptly be remitted to Broker. In any event, with respect to the Station, Licensee must oversee and take ultimate responsibility with respect to the provision of equal opportunities, lowest unit charge, and reasonable access to political candidates, and compliance with the political broadcast rules and policies of the FCC. 17. INDEMNIFICATION; WARRANTY. Broker will indemnify and hold Licensee harmless against all liability for its material breach of representations, warranties or covenants as well as for libel, slander, illegal competition or trade practice, infringement of trademarks, trade names or program titles, violation of rights of privacy, and infringement of copyrights and proprietary rights resulting from the broadcast of Programs furnished by Broker. Further, Broker warrants that the broadcasting of the Programs will not violate any rights of others, and Broker agrees to hold Licensee harmless from any and all claims, damages, liability, costs and expenses, including reasonable attorneys' fees, arising from the broadcasting of the Programs. Licensee reserves the right to refuse to broadcast any Programs containing matter which is or, in the reasonable opinion of Licensee, may be, or which a third party claims to be, violative of any right of Licensee or which may constitute a personal attack as the term is and has been defined by the Commission. Broker's obligation to hold Licensee harmless against the liabilities specified above shall survive any termination of this Agreement until the expiration of all applicable statutes of limitation. Reciprocally, Licensee shall indemnify and hold Broker harmless against all liability for its material 9 breach of representations, warranties or covenants as well as for libel, slander, illegal competition or trade practices, infringement or trademarks, trade names or program titles, violations of rights of privacy and infringement of copyrights and proprietary rights resulting from programming furnished by Licensees. Further, Licensee warrants that the broadcasting of the Programs will not violate any rights of others, and Licensee agrees to hold Broker harmless for any loss, damage or injury or any kind (including reasonable legal fees and related costs) arising from the broadcast of programming on the Station furnished by Licensee. Licensee's obligation to hold Broker harmless against the liabilities specified above shall survive any termination of this Agreement until the expiration of the applicable statute of limitations. 18. EVENTS OF DEFAULT: CURE PERIODS AND REMEDIES. 18.1 EVENTS OF DEFAULT. The following shall, after the expiration of the applicable cure periods, constitute Events of Default under the Agreement: 18.1.1 NON-PAYMENT. Broker's failure to timely pay the consideration provided for in Paragraph 2 hereof; or 18.1.2 DEFAULT IN COVENANTS OR ADVERSE LEGAL ACTION. The default by either party hereto in the material observance or performance of any material covenant, condition or agreement contained herein or in the Asset Purchase Agreement, or if either party shall (a) make a general assignment for the benefit of creditors, (b) files or has filed 10 against it a petition for bankruptcy, for reorganization or for the appointment of a receiver, trustee or similar creditors' representative for the property or assets of such party under any federal or state insolvency law, which, if filed against such party, has not been dismissed or discharged within sixty (60) days thereof; or 18.1.3 BREACH OF REPRESENTATION. If any material representation or warranty herein or in the Asset Purchase Agreement made by either party or in any certificate or document furnished by either party to the other pursuant to the provisions thereof shall prove to have been false or misleading in any material respect as of the time made or furnished; or 18.1.4 SUBSTITUTION OF PROGRAMMING. If, other than the hours described in Section 5.1(i) hereof, Licensee preempts or substitutes other programming for that supplied by Broker during five and one-half (5.5%) percent or more of the total hours of operation of each of the Stations during any calendar month. 18.2 CURE PERIODS. An Event of Default shall not be deemed to have occurred until thirty (30) business days, or fifteen (15) days in the event of a monetary default, after the non-defaulting party has provided the defaulting party with written notice specifying the event or events that, if not cured, would constitute an Event of Default and specifying the actions necessary to cure within such period. This period may be extended for a reasonable period of time if the defaulting party is acting in good faith to cure and such delay is not materially adverse to the other party. 18.3 TERMINATION UPON DEFAULT. In the event of the occurrence of an Event of Default pursuant to this Agreement the non-defaulting party may terminate this Agreement after any relevant cure period provided herein or therein if that party is not also in material default pursuant to this Agreement . If Licensee terminates this Agreement because Broker has defaulted in the performance of its obligations under 11 this Agreement, Licensee shall be underno further obligation to make available to Broker any further broadcast time or broadcast transmission facilities and all amounts accrued or payable to Licensee up to the date of termination which have not been paid, less any payments made on behalf of Licensee by Broker and any payment credits, shall immediately become due and payable. 18.4 LIABILITIES UPON TERMINATION. Broker shall be responsible for all liabilities, debts and obligations of Broker accrued from the purchase of air time and use of transmission facilities, including, without limitation, Broker's accounts payable, barter agreements and unaired advertisements, but not for Licensee's federal, state and local tax liabilities associated with Broker's payments to Licensee as provided herein. With respect to Broker's obligations for consideration in the form of air time, Broker may propose compensation to Licensee for meeting these obligations, but Licensee shall be under no duty to accept such compensation or to perform such obligations. 19. TERMINATION UPON ORDER OF GOVERNMENTAL AUTHORITY. The parties intend that this Agreement shall comply with all applicable federal, state and local regulations. In the event that a federal, state or local governmental authority designates a hearing with respect to the continuation or renewal of any licenses,permits or authorizations held by Licensee for the operation of each of the Station or orders the termination of this Agreement and/or the curtailment in any manner material to the relationship between the parties hereto of the provision of programming by Broker hereunder, Broker, at its option, may seek administrative or judicial appeal of or relief from such order(s) (in which event Licensee shall cooperate with Broker provided that Broker shall be responsible for legal fees incurred in such proceedings) or Broker 12 shall notify Licensee that they will terminate this Agreement in accordance with such order(s). If the FCC designates any renewal application of the Station for a hearing or commences a hearing to consider revocation of any license or permit for the Station as a consequence of this Agreement or for any reason other than the fault of Broker, Licensee shall be responsible for expenses they incur as a consequence of the FCC proceeding; PROVIDED, however, that Broker shall cooperate and comply with any reasonable request of Licensee to assemble and provide to the FCC information relating to Broker's performance under this Agreement. In the event of termination upon such governmental order(s), Broker shall pay to Licensee any fees due but unpaid as of the date of termination unless prohibited by such order(s) and Licensee shall reasonably cooperate with Broker to the extent permitted to enable Broker to fulfill advertising or other programming contracts then outstanding, in which event Licensee shall receive as compensation for such advertising or programming that which otherwise would have been paid to Broker thereunder. Thereafter, neither party shall have any liability to the other under the Agreement except as may be provided pursuant to Paragraph 16 hereof. 20. REPRESENTATIONS AND WARRANTIES. 20.1 MUTUAL REPRESENTATIONS AND WARRANTIES. Licensee and Broker represent that they are legally qualified, empowered and able to enter into this Agreement, and that the execution, delivery and performance hereof shall not constitute a breach or violation of any agreement, contract or undertaking to which any party is subject or by which it is bound. Licensee and Broker warrant, represent, covenant and certify that Licensee maintains, and shall continue to maintain, ultimate control over 13 each of the Station's facilities during the term of this Agreement, including, without limitation, control over the Station's finances, personnel and programming. Licensee and Broker represent and warrant that they have taken all necessary corporate and other action to make this Agreement legally binding on such party, and that the individuals signing this Agreement on their behalf have been fully authorized and empowered to execute this Agreement. 20.2 LICENSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS. Licensee makes the following further representations, warranties and covenants: 1 . AUTHORIZATIONS. Licensee holds and owns all licenses and other permits and authorizations necessary for the operation of the Station as presently conducted (including licenses, permits and authorizations issued by the FCC), and such licenses, permits and authorizations will be in full force and effect for the entire term hereof, unimpaired by any acts or omissions of Licensee or of any of their principals, employees, or agents. 2. LITIGATION. There is not now pending or, to the knowledge of Licensee, threatened, any action by the FCC or any other party to revoke, cancel, suspend, refuse to renew or modify adversely, any of the licenses, permits or authorizations necessary to the operation of the Station (other than proceedings of general applicability to the radio broadcast industry). Licensee has no reason to believe that any such license, permit or authorization will not be renewed in its ordinary course. 20.3 BROKER'S REPRESENTATIONS. WARRANTIES ANDCOVENANTS. The Broker hereby verifies that the arrangement contemplated by this Agreement complies 14 with the ownership limitations set forth in the Telecommunications Act of 1996, as adopted February 8, 1996. 21. FCC COMPLIANCE. Notwithstanding anything herein contained to the contrary, this Agreement, any related agreements and the parties' performance hereunder and thereunder (i) do not and will not constitute, create, or have the effect of constituting or creating, directly or indirectly, actual or practical ownership of Licensee or the Station by Broker or control, affirmative or negative, direct or indirect, by the Broker over the programming, management, or any other aspect of the operation of the Licensee or the Station, which ownership and control will remain exclusively and at all times in the Licensee; and (ii) do not and will not constitute the transfer, assignment, or disposition in any manner, voluntarily or involuntarily, directly or indirectly, of any license or permit at any time issued by the FCC to the License or the transfer of control of the Licensee within the meaning of Section 310(d) of the Act, without the FCC's necessary prior written consent having been obtained. 22. MODIFICATION AND WAIVER. No modification or waiver of any provision of this Agreement shall in any event be effected unless the same shall be in writing and signed by the party adversely affected by the waiver or modification, and then such waiver and consent shall be effective only in the specific instance and for the purpose for which given. 23. NO WAIVER - REMEDIES CUMULATIVE. No failure or delay on the part of Licensees or Broker in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any 15 other or further exercise thereof or the exercise of any other right or power. The rights and remedies of Licensee and Broker herein provided are cumulative and are not exclusive of any right or remedies which they may otherwise have. 24. CONSTRUCTION. This Agreement shall be construed in accordance with the laws of the State of New Jersey, and the obligations of the parties hereto are subject to all federal, state or municipal laws or regulations now or hereafter in force and to the regulations of the FCC and all other governmental bodies or authorities presently or hereafter to be constituted. 25. HEADINGS. The headings contained in this Agreement are included for convenience only and no such heading shall in any way alter the meaning of any provision. 26. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including, without limitation, any assignee of the Licensee for the FCC licenses for the Stations. Licensee and Broker shall not be permitted to assign this Agreement without obtaining the consent of the other party, which consent may be withheld for any reason whatsoever. 27. COUNTERPART SIGNATURE. This Agreement may be signed in one or more counterparts, each of which shall be deemed a duplicate original, binding on the parties hereto notwithstanding that the parties are not signatory to the original or the same counterpart. 28. NOTICES. Any notice required hereunder shall be in writing and any payment, notice or other communications shall be deemed given when delivered 16 personally or mailed by certified mail or Federal Express, postage prepaid, with return receipt requested, and addressed In accordance with the listing set forth in ATTACHMENT V hereto. If mailed, notice shall be deemed given three (3) days after it is mailed. 29. ENTIRE AGREEMENT. This Agreement, which includes the attached Exhibits and Schedules and the Asset Purchase Agreement, embodies the entire agreement between the parties and there are no other agreements, representations, warranties or understandings, oral or written, between them with respect to the subject matter hereof. No alterations, modification or change of this Agreement shall be valid unless by like written instrument. 30. NO PARTNERSHIP OR JOINT VENTURE CREATED. Nothing in this Agreement shall be construed to make Licensee and Broker partners or joint venturers of the other. None of the parties hereto shall have the right to bind the others to transact any business in the other's name or on its behalf, in any form or manner or to make any promises or representations on behalf of the other except as expressly provided for herein. 31. SEVERABILITY. In the event that any of the provisions contained in this Agreement are held to be invalid, illegal or unenforceable it shall not affect any other provision hereof and this Agreement shall be construed as if such invalid, illegal or unenforceable provisions had not been contained herein. 17 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. MULTICULTURAL RADIO NASSAU BROADCASTING PARTNERS, L.P. BROADCASTING, INC. BY NASSAU BROADCASTING PARTNERS, INC. ITS GENERAL PARTNER By: By: ---------------------------- ------------------------------------- Arthur Liu, President Louis F.Mercatanti, Jr., President 18 TIME BROKERAGE AGREEMENT ATTACHMENT I Broker will broadcast the Business News Network and may also provide news as well as promotions (including on-air giveaways) and contests. Programming provided by Broker may include commercial matter, including both program and spot announcement forms, as well as entertainment and public service programming. 19 TIME BROKERAGE AGREEMENT ATTACHMENT II Broker agrees to cooperate with Licensee in the broadcasting of Programs of the highest possible standard of excellence and for this purpose to observe the following regulations in the preparation, writing and broadcasting of its Programs: I. RESPECTFUL OF FAITHS. The subject of religion and references to particular faiths, tenets and customs shall be treated with respect at all times. II. NO DENOMINATIONAL ATTACKS. Programs shall not be used as a medium for attack on any faith, denomination or sect or upon any individual or organization. III. CONTROVERSIAL ISSUES. Any discussion of controversial issues of public importance shall be reasonably balanced with the presentation of contrasting viewpoints in the course of overall programming; no attacks on the honesty, integrity or like personal qualities of any person or group of persons shall be made during the discussion of controversial issues of public importance; and during the course of political campaigns, Programs are not to be used as a forum for editorializing about individual candidates. If such events occur, Licensees may require that responsive programming be aired. IV. DONATION SOLICITATION. Requests for donations in the form of a specific amount, for example, $1.00 to $5.00, shall not be made if there IS any suggestion that such donation will result In miracles, cures or prosperity. However, statements generally requesting donations to support the broadcast or church may be permitted. V. NO MINISTERIAL SOLICITATIONS. No invitations by a minister or other individual appearing on the program to have listeners come and visit him or her for consultation or 20 the like shall be made if such invitation implies that the listeners will receive consideration, monetary gain or cures for illness. VI. NO VENDING OF Miracles. Any exhortation to listeners to bring money to a church affair or service is prohibited if the exhortation, affair or service contains any suggestion that miracles, cures or prosperity will result. VII. SALE OF RELIGIOUS ARTIFACTS. The offering for sale of religious artifacts or other items for which listeners would send money is prohibited unless such items are readily available in ordinary commerce or are clearly being sold for legitimate fundraising purposes. VIII. NO MIRACLE SOLICITATION. Any invitations to listeners to meet at places other than the church and/or to attend other than regular services of the church is prohibited if the invitation, meeting or service contains any claim that miracles, cures or prosperity will result. IX. NO CLAIMS OF UNDOCUMENTED MIRACLES. Any claims of miracles or cures not documented in biblical scripture and quoted in context are prohibited; also., this prohibits the minister and/or other individual appearing on the program from personally claiming any cures or miracles and also prohibits the presentation of any testimonials regarding such claims, either in person or in writing. X. NO PLUGOLA OR PAYOLA. The mention of any business activity or "plug" for any commercial, professional or other related endeavor, except where contained in an actual commercial message of a sponsor, is prohibited. 21 XI. NO LOTTERIES. Announcements giving any information about lotteries or games prohibited by federal or state law or regulation are prohibited. XII. NO "DREAM BOOKS". References to "dream books", the "straight line" or other direct or indirect descriptions or solicitations relative to the "numbers game" or the policy game" or any other form of gambling are prohibited. XIII. NO NUMBERS GAMES. References to chapter and verse numbers, paragraph numbers or song numbers which involve three (3) digits should be avoided and, when used, must relate to the overall theme of the program. XIV. ELECTION PROCEDURES. At least ninety (90) days before the start of any primary or regular election campaign, Broker will clear with Licensee's General Manager the rate Broker will charge for the time to be sold to candidates for public office and/or their supporters to make certain that the rate charged conforms to all applicable laws and Station policy. XV. SPOT COMMERCIAL LIMITATIONS. with respect to any given segment of air time hereunder, the amount of spot commercial matter shall not exceed twenty (20) minutes during any sixty (60) minute segment. Broker will provide, for attachment to each of the Stations' logs, a list of all commercial announcements carried during its programming, XVI. ANNOUNCEMENTS. Broker shall broadcast (i) an announcement in a form satisfactory to Licensees at the beginning of each hour to identify Station call letters, (ii) an announcement at the beginning and end of each program and hourly, as appropriate, to indicate that program time has been purchased by Broker; and (iii) any other announcement that may be required by law, regulation or Station policy. 22 XVII. CREDIT TERMS ADVERTISING. Pursuant to rules of the Federal Trade Commission, no advertising of credit terms shall be made over the Stations beyond mention of the fact that, if desired, credit terms are available. XVIII. COMMERCIAL RECORDKEEPING. Broker shall not receive any consideration in violation of the FCC's sponsorship identification rule and the anti-payola provisions of the Communications Act. No commercial messages ("plugs") or undue references shall be made in programming presented over each of the Stations to any business venture, profit-making activity, or other interest (other than non-commercial announcements for BONA fide. charities, church activities or other public service activities) in which Broker (or anyone else) is directly or indirectly interested without the same having been approved in advance by Licensee's General Managers and such broadcast being announced and logged and sponsored. XIX. NO ILLEGAL ANNOUNCEMENTS. No announcements or promotion prohibited by federal or state law or regulation of any lottery or game shall be made over each of the Stations. Any game, contest or promotion relating to or to be presented over the Stations must be fully stated and explained in advance to Licensee which reserves the right, in its sole discretion, to reject any game, contest or promotion. XX. PROGRAMMING PROHIBITIONS. Broker shall not knowingly broadcast any of the following Programs or announcements: A. FALSE CLAIMS. False or unwarranted claims for any product or service. B. UNFAIR IMITATION. Infringements of another advertiser's rights 23 through plagiarism or unfair limitation or either program idea or copy, or any other unfair competition. C. COMMERCIAL DISPARAGEMENT. Any disparagement of competitors or competitive goods. D. PROFANITY. Any Programs or announcements that are slanderous, obscene, profane, vulgar, repulsive or offensive, either in them or treatment. E. PRICE DISCLOSURE. Any price mentions except as permitted by Licensees' policies current at the time. F. DESCRIPTIONS OF BODILY FUNCTIONS. Any programming which describes in a repellent manner internal bodily functions or symptomatic results or internal disturbances. G. UNAUTHENTICATED TESTIMONIALS. Any testimonials which cannot be authenticated. H. CONFLICT ADVERTISING. Any advertising matter or announcement which may, in the opinion of Licensee, be injurious or prejudicial to the interests of the public, each of the Stations, or honest advertising and reputable business in general. Licensee, may waive any of the foregoing regulations in specific instances if, in its reasonable opinion, good broadcasting in the public interest will be served thereby. In any case where questions of policy or Interpretation arise, Broker shall submit the same to Licensee for decision before making any commitments in connection therewith. 24 TIME BROKERAGE AGREEMENT ATTACHMENT III LICENSEE'S ACCOUNTS RECEIVABLE 25 TIME BROKERAGE AGREEMENT ATTACHMENT IV County of State of New Jersey ANTI-PAYOLA/PLUGOLA AFFIDAVIT Louis F. Mercatanti, Jr., being first duly sworn, deposes and says as follows: 26 1 . He is the President of the General Partner for NASSAU BROADCASTING PARTNERS, L.P. ("BROKER"). 2. He has acted in the above capacity since (DATE) 3. No matter has been provided for broadcast by Station WJHR-AM (hereinafter collectively referred to as the "Station"), for which service, money or other valuable consideration has been directly or indirectly paid, or promised to, or charged, or accepted, by him from any person, which matter at the time so broadcast has not been announced or otherwise indicated as paid for or furnished by such person. 4. So far as he is aware, no matter has been provided for broadcast by the Station for which service, money or other valuable consideration has been directly or indirectly paid, or promised to, or charged, or accepted by the Station by the Broker, or by any independent contractor engaged by the Broker in furnishing Programs, from any person, which matter at the time so broadcast has not been announced or otherwise indicated as paid for or furnished by such person. 5. In the future, he will not pay, promise to pay, request or receive any service, money or any other valuable consideration, direct or indirect, from a third-party in exchange for the influencing of, or the attempt to influence, the preparation or presentation of broadcast matter on the Station. 6. Except as may be reflected in Paragraph 7 hereof, neither he, his spouse nor any member of his immediate family, has any present, direct or indirect, ownership interest In any entity engaged in the following business or activities (other than an investment in a corporation whose stock is publicly held), serves as an officer or 27 director of, whether with or without compensation, or serves as an employee of, any entity engaged in the following business or activities: a. the publishing of music; b. the production, distribution (including wholesale and retail sales outlets), manufacture or exploitation of music, films, tapes, recordings or electrical transcriptions of any program material intended for radio broadcast use; c. the exploitation, promotion or management of persons rendering artistic, production and/or other services in the entertainment field; d. the ownership or operation of one or more radio or television stations; e. the wholesale or retail sale of records intended for public purchase; and f. the sale of advertising time other than on the Station or any other station owned by the Broker. 7.A full disclosure of any such interest referred to in Paragraph 6 above is as follows: Affiant Subscribed and sworn to before me this DAY of 199 28 Notary Public My commission expires: TIME BROKERAGE AGREEMENT ATTACHMENT V If the notice is to Licensees, to It at: Multicultural Radio Broadcasting, Inc. 449 Broadway New York, New York 10013 Attention: Arthur Liu, President with a copy to: Mark N. Lipp, Esq. Shook, Hardy & Bacon, LLP 801 Pennsylvania Avenue, NW Suite 600 Washington, DC 20004 29 If the notice is to Broker: Nassau Broadcasting Partners, L.P. 619 Alexander Road, Third Floor Princeton, New Jersey 08540 Attention: Louis F. Mercatanti, Jr. with a copy to: Mark D. Schorr, Esq. Sterns & Weinroth A Professional Corporation 50 West State Street, Suite 1400 P.O. Box 1298 Trenton, New Jersey 08607-1298 30 TIME BROKERAGE AGREEMENT ATTACHMENT V If the notice is to Licensees, to It at: Multicultural Radio Broadcasting, Inc. 449 Broadway New York, New York 10013 Attention: Arthur Liu, President with a copy to: Mark N. Lipp, Esq. Shook, Hardy & Bacon, LLP 801 Pennsylvania Avenue, NW Suite 600 Washington, DC 20004 If the notice is to Broker: Nassau Broadcasting Partners, L.P. 619 Alexander Road, Third Floor Princeton, New Jersey 08540 Attention: Louis F. Mercatanti, Jr. with a copy to: Mark D. Schorr, Esq. Sterns & Weinroth A Professional Corporation 50 West State Street, Suite 1400 P.O. Box 1298 Trenton, New Jersey 08607-1298 31 EX-10.3 18 0018.txt TIME BROKERAGE AGMT, DTD 11/21/1998 Exhibit 10.3 TIME BROKERAGE AGREEMENT TIME BROKERAGE AGREEMENT (the "Agreement") dated as of November 12, 1998, by and Multicultural Radio Broadcasting, Inc. ("Multicultural") (hereinafter referred to as "Licensee") and NASSAU BROADCASTING PARTNERS, L.P., a Delaware Limited Partnership (the "Broker"). WITNESSETH: WHEREAS, Multicultural is authorized to operate Radio Stations WSBG-FM and WVPO-AM, licensed to Stroudsburg, Pennsylvania and East Stroudsburg, Pennsylvania, respectively (hereinafter referred to as the "Stations) pursuant to licenses issued by the Federal Communications Commission ("FCC"); WHEREAS, the Broker, formerly the owner of the licenses has contemporaneously, with the execution of this Agreement sold and conveyed all of the assets of the radio stations to Licensee pursuant to a certain Asset Purchase Agreement; WHEREAS, the parties hereto have carefully considered the FCC's time brokerage policies and intend that this Agreement in all respects comply with such policies; WHEREAS, Licensee desires to enter into this Agreement to provide an interim source of diverse programming and income to sustain the operations of the Stations until the expiration of the Time Brokerage Agreement; WHEREAS, Broker desires to provide an over-the-air program service to Monroe and Pike Counties, Pennsylvania, using the facilities of the Stations; 1 WHEREAS, Licensee agrees to provide time on the Stations to Broker on terms and conditions that conform to the policies of the Stations and the FCC for time brokerage arrangements and as set forth herein; and WHEREAS, Broker agrees to utilize the facilities of the Stations solely to broadcast programming that conforms with the policies of the Licensee and with all rules, regulations and policies of the FCC and as set forth herein. NOW, THEREFORE, for and in consideration of the mutual covenants herein contained, the parties hereto have agreed and do agree as follows: 1 . FACILITIES. Licensee agrees to make broadcasting transmission facilities of each of the Stations, including their respective subcarriers, available to Broker for a minimum of 158 hours per week (the "Minimum"), which will facilitate the broadcasting of Broker's programs (the "Programs"), which shall originate either from Broker's own studios or from Licensee's facilities or from other studios contracted for by Broker. The Programs are described in ATTACHMENT I hereto. Broker and Licensees represent to each other that they have, and will have throughout the term of this Agreement, the capability of transmitting either by STL or phone lines from their respective broadcast and transmission studios. 2. PAYMENTS. Broker hereby agrees to pay Licensee for the broadcast of the programs hereunder a fee in the amount of One Hundred and Seventy Five Thousand Dollars ($175,000) quarterly, in advance, commencing on the Effective Date of this Agreement as provided in Section 3 in fra below. 2 3. TERM. This Agreement shall become effective on the Effective Date defined herein and shall continue for a period of three (3) years thenceforth or the date of termination, if terminated, pursuant to the provision of this Agreement. Notwithstanding the above, upon mutual written consent the parties may elect to extend the term for an additional two (2) years, provided that either party provides written notice to the other at least 120 days prior to the expiration of the term. a. EFFECTIVE DATE. This Agreement shall become effective on the date the Broker closes on the transfer of all of the assets of the station under that certain Asset Purchase Agreement even date herewith. 4. PROGRAMS. Broker shall furnish or cause to be furnished the artistic personnel and material for the Programs as provided by this Agreement and all Programs shall be in good taste and in accordance with the rules, regulations and policies of the FCC. All Programs shall be prepared and presented in conformity with the regulations prescribed in ATTACHMENT III hereto. All advertising spots and promotional material or announcements shall comply with all applicable federal, state and local regulations and policies. 5. STATIONS' FACILITIES. 5.1 OPERATION OF STATIONS. Licensee represents that the Stations now operate and will continue to operate in accordance with the authorizations issued by the FCC. Throughout the term of this Agreement, Licensee shall make the Stations available to the Broker for operation with the maximum authorized facilities twenty-four (24) hours a day, seven (7) days a week, except for: (i) up to ten (10) hours per week 3 for public affairs, news, information and other non-entertainment programming intended to address the needs and interests of the Stations' service area; (ii) down-time occasioned by routine maintenance not to exceed two (2) hours each Sunday morning between the hours of 12 Midnight and 6:00 a.m. Any routine maintenance work affecting the operation of the Stations at full power shall be scheduled upon, if practicable, at least forty-eight (48) hours prior notice to Broker; and (iii) STL and phone lines as set forth in Paragraph 1 hereof. 5.2 INTERRUPTION OF NORMAL OPERATIONS. If any of the Stations suffer loss or damage of any nature to their transmission facilities which results in the interruption of service or the inability of any of the Stations to operate with their maximum authorized facilities, pursuant to the authorization under which the Stations are then operating, Licensee shall immediately notify Broker and shall undertake such repairs as necessary to restore the full-time operation of the Stations with their then maximum authorized facilities within thirty (30) days from the occurrence of such loss or damage. If such repairs are not made within the allotted period, Broker may give notice to Licensee of Broker's intention to terminate this Agreement and the Purchase Agreement, in which event this Agreement shall terminate on the thirtieth (30) day following such notice, any other provision of this Agreement notwithstanding unless the repairs are made prior to the expiration of said thirty (30) day period. 6. HANDLING OF MAIL. Except as required to comply with the FCC rules and policies, including those regarding the maintenance of the public inspection file (which shall at all times remain the responsibility of Licensee), Licensee shall not be required 4 to receive or handle mail, cables, telegraph or telephone calls in connection with the Programs broadcast hereunder unless Licensee has agreed in writing to do so. 7. PROGRAMMING AND OPERATIONS STANDARDS. Broker agrees to abide by the standards set forth in ATTACHMENT III hereto in its programming and operations. Broker further agrees that if, in the sole judgment of Licensee, or the Stations' General Manager, Broker does not comply with said standards, Licensee may suspend or cancel any program not in compliance. 8. RESPONSIBILITY FOR EMPLOYEES AND EXPENSES. 8.1 Broker shall employ and be responsible for the salaries, taxes, insurance and related costs for all personnel used in the production of its programming (including salespeople, traffic personnel, board operators and programming staff). Licensee will provide and be responsible for the Stations' personnel necessary for the broadcast transmission of the Programs (including, without limitation, a full-time Station Manager) and will be responsible for the salaries, taxes, insurance and related costs for all the Stations' personnel used in the broadcast transmission of the Programs. Whenever on the Stations' premises, all personnel shall be subject to the supervision and the direction of Licensees' Station Manager. Broker shall reimburse Licensee for all telephone calls associated with program production and listener responses, for all fees to ASCAP, BMI and SESAC, and for any other copyright fees attributable to its programming broadcast on the Stations. 8.2 PROGRAM TRANSMISSION COST AND MAINTENANCE. Broker shall be solely responsible for all expenses incurred in the organization and/or delivery of 5 programming from any remote location and the main studios of the stations, including electric power at the station transmitter sites, and further shall be responsible for all maintenance, including all expenses related thereto, of the station's transmitter antennae, towers, and equipment, and in conjunction with the broadcasting of programming and agrees to, among other things, and at its sole expense, paint the AM tower on or before April 30, 1999, and replace the AM studio console by fourth (4th) quarter 1999, and repair the Harris MW-1A transmitter within 90 days of the date hereof, and otherwise agrees to turn over all of such equipment to Licensee at the end of the LMA in good and working order, normal wear and tear excepted. 9. TREATMENT OF LICENSEE'S REVENUES. Broker shall retain all Licensee's revenues received on the Effective Date and during the term of this Agreement, and shall reimburse Licensee for all expenses related to the operation of the Stations, including but not limited to insurance premiums, real estate taxes, maintenance and repair of real and personal property of Licensee ("Accounts Payable"), except for payment due Licensee's station manager and other employees. Licensee shall cooperate with Broker in order to ensure Broker receives all such revenues, including executing all assignments and other instruments necessary to insure such receipt. To the extent Accounts Payable exceed accounts receivable from the sale of advertising time on the Stations as of the date of this Agreement, Licensee shall pay Broker the difference between such amounts within fifteen (15) days. 10. CONTROL OF STATION. Notwithstanding anything to the contrary in this Agreement, Licensee shall have full authority and power over the operations of the 6 Stations during the period of this Agreement, Licensee shall provide and pay for the Manager(s) of the Stations, who shall report and be accountable solely to Licensee and who shall direct the day-to-day operation of the Stations. Licensee shall retain control, said control to be reasonably exercised, over the policies, programming and operations of the Stations, including, without limitation, the right to decide whether to accept or reject any programming or advertisements, the right to preempt any Programs in order to broadcast a program deemed by Licensee to be of greater national, regional or local interest, and the right to take any other actions necessary for compliance with the laws of the United States, the State of New Jersey, the rules, regulations and policies of the FCC, and the rules, regulations and policies of other federal governmental authorities, including the Federal Trade Commission and the Department of Justice. Licensee and Broker shall cooperate with one another in meeting all of the FCC's requirements with respect to public service programming, for maintaining the political and public inspection files of each of the Stations' logs and for the preparation of issues/program lists. Broker shall, upon request by Licensee, provide Licensee with information with respect to such of the Programs which are responsive to public needs and interest so as to assist Licensee in the preparation of required programming reports and will provide, upon request, other information to enable Licensee to prepare other records, reports and logs required by the FCC or other local, state or federal governmental agencies. 11. SPECIAL EVENTS. Licensee reserve the right, to preempt any of the broadcasts of the Programs referred to herein and to use part or all of the time 7 contracted for herein by Broker to broadcast special events of importance. In all such cases, Licensee will use their best efforts to give Broker reasonable notice of their intention to preempt such broadcast or broadcasts and, in the event of such preemption, Broker shall receive a payment credit for the broadcasts so omitted. In addition, Licensee shall be responsible for insuring that each of the Stations' identification announcements are broadcast in accordance with FCC requirements, and Broker shall cooperate with Licensee to facilitate such broadcasts. 12. FORCE MAJEURE. Any failure or impairment of facilities or any delay or interruption in broadcasting Programs or failure at any time to furnish facilities, in whole or in part, for broadcasting due to acts of God, strikes, or threats thereof, force MAJEURE, or due to causes beyond the control of Licensees, shall not constitute a breach of this Agreement, and Licensee will not be liable to Broker. 13. RIGHT TO USE THE PROGRAMS. The right to use the Programs produced by Broker and to authorize their use in any manner and in any media whatsoever shall be and remain vested in Broker. 14. PAYOLA. Broker agrees that neither it nor any of its employees or agents will accept any compensation or any kind of gift or gratuity of any kind whatsoever, regardless of its value or form, including, but not limited to, a commission, discount, bonus, materials, supplies or other merchandise, services or labor, whether or not pursuant to written contracts or agreements between them and merchants or advertisers, unless, to the extent required by the FCC, the payer is identified in the program as having paid -for or furnished such consideration. Broker agrees annually, 8 or more frequently upon the request of Licensee, to provide Licensee with Payola Affidavits substantially in the form attached hereto as ATTACHMENT IV. 15. COMPLIANCE WITH LAW. Broker agrees that, throughout the term of this Agreement, Broker will materially comply with all laws and regulations applicable in the conduct of Licensee's business, and Broker acknowledges that Licensee has not urged, counseled or advised the use of any unfair business practice. 16. POLITICAL ADVERTISING. Broker shall cooperate with Licensee as Licensee complies with the political broadcasting requirements of the Federal Communications Act of 1934, as amended (the "Act") and the FCC's rules and policies thereunder. Broker shall supply such information promptly to Licensee as may benecessary to comply with the lowest unit charge requirements of Section 315 of the Act. To the extent that Licensee believes necessary, in Licensee's sole discretion, Broker shall release advertising availability's to Licensee to permit them to comply with its reasonable access provisions of Section 312(a)(7) of the Act, the equal opportunities provision of Section 315 of the Act, and the rules and policies of the FCC thereunder; PROVIDED, HOWEVER, that all revenues realized by Licensee as a result of such a release of advertising time shall promptly be remitted to Broker. In any event, with respect to the Stations, Licensee must oversee and take ultimate responsibility with respect to the provision of equal opportunities, lowest unit charge, and reasonable access to political candidates, and compliance with the political broadcast rules and policies of the FCC. 17. INDEMNIFICATION; WARRANTY. Broker will indemnify and hold Licensee harmless against all liability for its material breach of representations, warranties or 9 covenants as well as for libel, slander, illegal competition or trade practice, infringement of trademarks, trade names or program titles, violation of rights of privacy, and infringement of copyrights and proprietary rights resulting from the broadcast of Programs furnished by Broker. Further, Broker warrants that the broadcasting of the Programs will not violate any rights of others, and Broker agrees to hold Licensee harmless from any and all claims, damages, liability, costs and expenses, including reasonable attorneys' fees, arising from the broadcasting of the Programs. Licensee reserves the right to refuse to broadcast any Programs containing matter which is or, in the reasonable opinion of Licensee, may be, or which a third party claims to be, violative of any right of Licensee or which may constitute a personal attack as the term is and has been defined by the Commission. Broker's obligation to hold Licensee harmless against the liabilities specified above shall survive any termination of this Agreement until the expiration of all applicable statutes of limitation. Reciprocally, Licensee shall indemnify and hold Broker harmless against all liability for its material breach of representations, warranties or covenants as well as for libel, slander, illegal competition or trade practices, infringement or trademarks, trade names or program titles, violations of rights of privacy and infringement of copyrights and proprietary rights resulting from programming furnished by Licensees. Further, Licensee warrants that the broadcasting of the Programs will not violate any rights of others, and Licensee agrees to hold Broker harmless for any loss, damage or injury or any kind (including reasonable legal fees and related costs) arising from the broadcast of programming on the Stations furnished by Licensee. Licensee's obligation to hold Broker harmless 10 against the liabilities specified above shall survive any termination of this Agreement until the expiration of the applicable statute of limitations. 18. EVENTS OF DEFAULT: CURE PERIODS AND REMEDIES. 18.1 EVENTS OF DEFAULT. The following shall, after the expiration of the applicable cure periods, constitute Events of Default under the Agreement: 18.1.1 NON-PAYMENT. Broker's failure to timely pay the consideration provided for in Paragraph 2 hereof; or 18.1.2 DEFAULT IN COVENANTS OR ADVERSE LEGAL ACTION. The default by either party hereto in the material observance or performance of any material covenant, condition or agreement contained herein or in the Purchase Agreement, or if either party shall (a) make a general assignment for the benefit of creditors, (b) files or has filed against it a petition for bankruptcy, for reorganization or for the appointment of a receiver, trustee or similar creditors' representative for the property or assets of such party under any federal or state insolvency law, which, if filed against such party, has not been dismissed or discharged within sixty (60) days thereof; or 18.1.3 BREACH OF REPRESENTATION. If any material representation or warranty herein made by either party hereto or in any certificate or document furnished by either party to the other pursuant to the provisions hereof shall prove to have been false or misleading in any material respect as of the time made or furnished; or 18.1.4 SUBSTITUTION OF PROGRAMMING. If, other than the hours described in Section 5.1(i) hereof, Licensee preempts or substitutes other programming 11 for that supplied by Broker during five and one-half (5.5%) percent or more of the total hours of operation of each of the Stations during any calendar month. 18.2 CURE PERIODS. An Event of Default shall not be deemed to have occurred until thirty (30) business days, or fifteen (1 5) days in the event of a monetary default, after the non-defaulting party has provided the defaulting party with written notice specifying the event or events that, if not cured, would constitute an Event of Default and specifying the actions necessary to cure within such period. This period may be extended for a reasonable period of time if the defaulting party is acting in good faith to cure and such delay is not materially adverse to the other party. 18.3 TERMINATION UPON DEFAULT. In the event of the occurrence of an Event of Default pursuant to this Agreement the non-defaulting party may terminate this Agreement after any relevant cure period provided herein or therein if that party is not also in material default pursuant to this Agreement . If Licensee terminates this Agreement because Broker has defaulted in the performance of its obligations under this Agreement, Licensee shall be under no further obligation to make available to Broker any further broadcast time or broadcast transmission facilities and all amounts accrued or payable to Licensees up to the date of termination which have not been paid, less any payments made on behalf of Licensees by Broker and any payment credits, shall immediately become due and payable. 18.4 LIABILITIES UPON TERMINATION. Broker shall be responsible for all liabilities, debts and obligations of Broker accrued from the purchase of air time and use of transmission facilities, including, without limitation, Broker's accounts payable, barter 12 agreements and unaired advertisements, but not for Licensee's federal, state and local tax liabilities associated with Broker's payments to Licensee as provided herein. With respect to Broker's obligations for consideration in the form of air time, Broker may propose compensation to Licensees for meeting these obligations, but Licensee shall be under no duty to accept such compensation or to perform such obligations. 19. TERMINATION UPON ORDER OF GOVERNMENTAL AUTHORITY. The parties intend that this Agreement shall comply with all applicable federal, state and local regulations. In the event that a federal, state or local governmental authority designates a hearing with respect to the continuation or renewal of any licenses, permits or authorizations held by Licensee for the operation of each of the Stations or orders the termination of this Agreement and/or the curtailment in any manner material to the relationship between the parties hereto of the provision of programming by Broker hereunder, Broker, at its option, may seek administrative or judicial appeal of or relief from such order(s) (in which event Licensee shall cooperate with Broker provided that Broker shall be responsible for legal fees incurred in such proceedings) or Broker shall notify Licensee that they will terminate this Agreement in accordance with such order(s). If the FCC designates any renewal application of the Stations for a hearing or commences a hearing to consider revocation of any license or permit for the Stations as a consequence of this Agreement or for any reason other than the fault of Broker, Licensee shall be responsible for expenses they incur as a consequence of the FCC proceeding; PROVIDED, however, that Broker shall cooperate and comply with any reasonable request of Licensee to assemble and provide to the FCC information 13 relating to Broker's performance under this Agreement. In the event of termination upon such governmental order(s), Broker shall pay to Licensee any fees due but unpaid as of the date of termination unless prohibited by such order(s) and Licensee shall reasonably cooperate with Broker to the extent permitted to enable Broker to fulfill advertising or other programming contracts then outstanding, in which event Licensee shall receive as compensation for such advertising or programming that which otherwise would have been paid to Broker thereunder. Thereafter, neither party shall have any liability to the other under the Agreement except as may be provided pursuant to Paragraph 16 hereof. 20. REPRESENTATIONS AND WARRANTIES. 20.1 MUTUAL REPRESENTATIONS AND WARRANTIES. Licensee and Broker represent that they are legally qualified, empowered and able to enter into this Agreement, and that the execution, delivery and performance hereof shall not constitute a breach or violation of any agreement, contract or undertaking to which any party is subject or by which it is bound. Licensee and Broker warrant, represent, covenant and certify that Licensee maintains, and shall continue to maintain, ultimate control over each of the Stations' facilities during the term of this Agreement, including, without limitation, control over each of the Stations' finances, personnel and programming. Licensee and Broker represent and warrant that they have taken all necessary corporate and other action to make this Agreement legally binding on such party, and that the individuals signing this Agreement on their behalf have been fully authorized and empowered to execute this Agreement. 14 20.2 LICENSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS. Licensee makes the following further representations, warranties and covenants: 1 . AUTHORIZATIONS. Licensee holds and owns all licenses and other permits and authorizations necessary for the operation of each of the Stations as presently conducted (including licenses, permits and authorizations issued by the FCC), and such licenses, permits and authorizations will be in full force and effect for the entire term hereof, unimpaired by any acts or omissions of Licensee or of any of their principals, employees, or agents. 2. LITIGATION. There is not now pending or, to the knowledge of Licensee, threatened, any action by the FCC or any other party to revoke, cancel, suspend, refuse to renew or modify adversely, any of the licenses, permits or authorizations necessary to the operation of each of the Stations (other than proceedings of general applicability to the radio broadcast industry). Licensee, or either of them, have no reason to believe that any such license, permit or authorization will not be renewed in its ordinary course. 20.3 BROKER'S REPRESENTATIONS. WARRANTIES AND Covenants. The Broker hereby verifies that the arrangement contemplated by this Agreement complies with the ownership limitations set forth in the Telecommunications Act of 1996, as adopted February 8, 1996. 21. FCC COMPLIANCE. Notwithstanding anything herein contained to the contrary, this Agreement, any related agreements and the parties' performance hereunder and thereunder (i) do not and will not constitute, create, or have the effect of 15 constituting or creating, directly or indirectly, actual or practical ownership of Licensee or any of the Stations by Broker or control, affirmative or negative, direct or indirect, by the Broker over the programming, management, or any other aspect of the operation of the Licensee or any of the Stations, which ownership and control will remain exclusively and at all times in the Licensee; and (ii) do not and will not constitute the transfer, assignment, or disposition in any manner, voluntarily or involuntarily, directly or indirectly, of any license or permit at any time issued by the FCC to the License or the transfer of control of the Licensee within the meaning of Section 310(d) of the Act, without the FCC's necessary prior written consent having been obtained. 22. MODIFICATION AND WAIVER. No modification or waiver of any provision of this Agreement shall in any event be effected unless the same shall be in writing and signed by the party adversely affected by the waiver or modification, and then such waiver and consent shall be effective only in the specific instance and for the purpose for which given. 23. NO WAIVER - REMEDIES CUMULATIVE. No failure or delay on the part of Licensees or Broker in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of Licensee and Broker herein provided are cumulative and are not exclusive of any right or remedies which they may otherwise have. 16 24. CONSTRUCTION. This Agreement shall be construed in accordance with the laws of the State of New Jersey, and the obligations of the parties hereto are subject to all federal, state or municipal laws or regulations now or hereafter in force and to the regulations of the FCC and all other governmental bodies or authorities presently or hereafter to be constituted. 25. HEADINGS. The headings contained in this Agreement are included for convenience only and no such heading shall in any way alter the meaning of any provision. 26. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including, without limitation, any assignee of the Licensee for the FCC licenses for the Stations. Licensee and Broker shall not be permitted to assign this Agreement without obtaining the consent of the other party, which consent may be withheld for any reason whatsoever. 27. COUNTERPART SIGNATURE. This Agreement may be signed in one or more counterparts, each of which shall be deemed a duplicate original, binding on the parties hereto notwithstanding that the parties are not signatory to the original or the same counterpart. 28. NOTICES. Any notice required hereunder shall be in writing and any payment, notice or other communications shall be deemed given when delivered personally or mailed by certified mail or Federal Express, postage prepaid, with return 17 receipt requested, and addressed In accordance with the listing set forth in ATTACHMENT V hereto. If mailed, notice shall be deemed given three (3) days after it is mailed. 29. ENTIRE AGREEMENT. This Agreement, which includes the attached Exhibits and Schedules and the Purchase Agreement, embodies the entire agreement between the parties and there are no other agreements, representations, warranties or understandings, oral or written, between them with respect to the subject matter hereof. No alterations, modification or change of this Agreement shall be valid unless by like written instrument. 30. NO PARTNERSHIP OR JOINT VENTURE CREATED. Nothing in this Agreement shall be construed to make Licensee and Broker partners or joint venturers of the other. None of the parties hereto shall have the right to bind the others to transact any business in the other's name or on its behalf, in any form or manner or to make any promises or representations on behalf of the other except as expressly provided for herein. 31. SEVERABILITY. In the event that any of the provisions contained in this Agreement are held to be invalid, illegal or unenforceable it shall not affect any other provision hereof and this Agreement shall be construed as if such invalid, illegal or unenforceable provisions had not been contained herein. 18 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. MULTICULTURAL RADIO BROADCASTING, INC. By: /s/ Arthur Liu --------------------------------------- Arthur Liu, President NASSAU BROADCASTING PARTNERS, L.P. By: Nassau Broadcasting Partners, Inc., its general partner By: /s/ Louis F. Mercatanti, Jr. -------------------------------------------- Louis F. Mercatanti, Jr., President 19 TIME BROKERAGE AGREEMENT ATTACHMENT I Broker will broadcast an adult contemporary entertainment format which may include news as well as promotions (including on-air giveaways) and contests. Programming provided by Broker may include commercial matter, including that in both program or spot announcement forms, as well as entertainment and public service programming. 20 TIME BROKERAGE AGREEMENT ATTACHMENT II INTENTIONALLY BLANK 21 TIME BROKERAGE AGREEMENT ATTACHMENT III Broker agrees to cooperate with Licensee in the broadcasting of Programs of the highest possible standard of excellence and for this purpose to observe the following regulations in the preparation, writing and broadcasting of its Programs: I. RESPECTFUL OF FAITHS. The subject of religion and references to particular faiths, tenets and customs shall be treated with respect at all times. II. NO DENOMINATIONAL ATTACKS. Programs shall not be used as a medium for attack on any faith, denomination or sect or upon any individual or organization. III. CONTROVERSIAL ISSUES. Any discussion of controversial issues of public importance shall be reasonably balanced with the presentation of contrasting viewpoints in the course of overall programming; no attacks on the honesty, integrity or like personal qualities of any person or group of persons shall be made during the discussion of controversial issues of public importance; and during the course of political campaigns, Programs are not to be used as a forum for editorializing about individual candidates. If such events occur, Licensees may require that responsive programming be aired. IV. DONATION SOLICITATION. Requests for donations in the form of a specific amount, for example, $1.00 to $5.00, shall not be made if there IS any suggestion that such donation will result In miracles, cures or prosperity. However, statements generally requesting donations to support the broadcast or church may be permitted. 22 V. NO MINISTERIAL SOLICITATIONS. No invitations by a minister or other individual appearing on the program to have listeners come and visit him or her for consultation or the like shall be made if such invitation implies that the listeners will receive consideration, monetary gain or cures for illness. VI. NO VENDING OF MIRACLES. Any exhortation to listeners to bring money to a church affair or service is prohibited if the exhortation, affair or service contains any suggestion that miracles, cures or prosperity will result. VIL. SALE OF RELIGIOUS ARTIFACTS. The offering for sale of religious artifacts or other items for which listeners would send money is prohibited unless such items are readily available in ordinary commerce or are clearly being sold for legitimate fundraising purposes. VIII. NO MIRACLE SOLICITATION. Any invitations to listeners to meet at places other than the church and/or to attend other than regular services of the church is prohibited if the invitation, meeting or service contains any claim that miracles, cures or prosperity will result. IX. NO CLAIMS OF UNDOCUMENTED MIRACLES. Any claims of miracles or cures not documented in biblical scripture and quoted in context are prohibited; also., this prohibits the minister and/or other individual appearing on the program from personally claiming any cures or miracles and also prohibits the presentation of any testimonials regarding such claims, either in person or in writing. 23 X. NO PLUGOLA OR PAYOLA. The mention of any business activity or "plug" for any commercial, professional or other related endeavor, except where contained in an actual commercial message of a sponsor, is prohibited. XI. NO LOTTERIES. Announcements giving any information about lotteries or games prohibited by federal or state law or regulation are prohibited. XII. NO "DREAM BOOKS". References to "dream books", the "straight line" or other direct or indirect descriptions or solicitations relative to the "numbers game" or the policy game" or any other form of gambling are prohibited. XIII. NO NUMBERS GAMES. References to chapter and verse numbers, paragraph numbers or song numbers which involve three (3) digits should be avoided and, when used, must relate to the overall theme of the program. XIV. ELECTION PROCEDURES. At least ninety (90) days before the start of any primary or regular election campaign, Broker will clear with Licensee's General Manager the rate Broker will charge for the time to be sold to candidates for public office and/or their supporters to make certain that the rate charged conforms to all applicable laws and Station policy. XV. SPOT COMMERCIAL LIMITATIONS. with respect to any given segment of air time hereunder, the amount of spot commercial matter shall not exceed twenty (20) minutes during any sixty (60) minute segment. Broker will provide, for attachment to each of the Stations' logs, a list of all commercial announcements carried during its programming, XVI. ANNOUNCEMENTS. Broker shall broadcast (i) an announcement 24 in a form satisfactory to Licensees at the beginning of each hour to identify Station call letters, (ii) an announcement at the beginning and end of each program and hourly, as appropriate, to indicate that program time has been purchased by Broker; and (iii) any other announcement that may be required by law, regulation or Station policy. XVII. CREDIT TERMS ADVERTISING. Pursuant to rules of the Federal Trade Commission, no advertising of credit terms shall be made over the Stations beyond mention of the fact that, if desired, credit terms are available. XVIII. COMMERCIAL RECORDKEEPING. Broker shall not receive any consideration in violation of the FCC's sponsorship identification rule and the anti-payola provisions of the Communications Act. No commercial messages ("plugs") or undue references shall be made in programming presented over each of the Stations to any business venture, profit-making activity, or other interest (other than non-commercial announcements for BONA fide. charities, church activities or other public service activities) in which Broker (or anyone else) is directly or indirectly interested without the same having been approved in advance by Licensee's General Managers and such broadcast being announced and logged and sponsored. XIX. NO ILLEGAL ANNOUNCEMENTS. No announcements or promotion prohibited by federal or state law or regulation of any lottery or game shall be made over each of the Stations. Any game, contest or promotion relating to or to be presented over the Stations must be fully stated and explained in advance to Licensee which reserves the right, in its sole discretion, to reject any game, contest or promotion. 25 XX. PROGRAMMING PROHIBITIONS. Broker shall not knowingly broadcast any of the following Programs or announcements: A. FALSE CLAIMS. False or unwarranted claims for any product or service. B. UNFAIR IMITATION. Infringements of another advertiser's rights through plagiarism or unfair limitation or either program idea or copy, or any other unfair competition. C. COMMERCIAL DISPARAGEMENT. Any disparagement of competitors or competitive goods. D. PROFANITY. Any Programs or announcements that are slanderous, obscene, profane, vulgar, repulsive or offensive, either in them or treatment. E. PRICE DISCLOSURE. Any price mentions except as permitted by Licensees' policies current at the time. F. DESCRIPTIONS OF BODILY FUNCTIONS. Any programming which describes in a repellent manner internal bodily functions or symptomatic results or internal disturbances. G. UNAUTHENTICATED TESTIMONIALS. Any testimonials which cannot be authenticated. H. CONFLICT ADVERTISING. Any advertising matter or announcement which may, in the opinion of Licensee, be injurious or prejudicial to the interests of the public, each of the Stations, or honest advertising and reputable business in general. 26 Licensee, may waive any of the foregoing regulations in specific instances if, in its reasonable opinion, good broadcasting in the public interest will be served thereby. In any case where questions of policy or Interpretation arise, Broker shall submit the same to Licensee for decision before making any commitments in connection therewith. 27 TIME BROKERAGE AGREEMENT ATTACHMENT IV County of State of New Jersey ANTI-PAYOLA/PLUGOLA AFFIDAVIT Louis F. Mercatanti, Jr., being first duly sworn, deposes and says as follows: 1. He is the President of the General Partner for NASSAU BROADCASTING PARTNERS, L.P. ("BROKER"). 2. He has acted in the above capacity since (DATE) ------ 3. No matter has been provided for broadcast by Stations WVPO (AM) and WSBG (FM) (hereinafter collectively referred to as the "Stations"), for which service, money or other valuable consideration has been directly or indirectly paid, or promised to, or charged, or accepted, by him from any person, which matter at the time so broadcast has not been announced or otherwise indicated as paid for or furnished by such person. 4. So far as he is aware, no matter has been provided for broadcast by the Stations for which service, money or other valuable consideration has been directly or indirectly paid, or promised to, or charged, or accepted by the Stations by the Broker, or by any independent contractor engaged by the Broker in furnishing Programs, from any 28 person, which matter at the time so broadcast has not been announced or otherwise indicated as paid for or furnished by such person. 5. In the future, he will not pay, promise to pay, request or receive any service, money or any other valuable consideration, direct or indirect, from a third-party in exchange for the influencing of, or the attempt to influence, the preparation or presentation of broadcast matter on the Stations. 6. Except as may be reflected in Paragraph 7 hereof, neither he, his spouse nor any member of his immediate family, has any present, direct or indirect, ownership interest In any entity engaged in the following business or activities (other than an investment in a corporation whose stock is publicly held), serves as an officer or director of, whether with or without compensation, or serves as an employee of, any entity engaged in the following business or activities: a. the publishing of music; b. the production, distribution (including wholesale and retail sales outlets), manufacture or exploitation of music, films, tapes, recordings or electrical transcriptions of any program material intended for radio broadcast use; c. the exploitation, promotion or management of persons rendering artistic, production and/or other services in the entertainment field; d. the ownership or operation of one or more radio or television stations; e. the wholesale or retail sale of records intended for public purchase; and 29 f. the sale of advertising time other than on the Stations or any other station owned by the Broker. 7.A full disclosure of any such interest referred to in Paragraph 6 above is as follows: Affiant Subscribed and sworn to before me this DAY of 199 Notary Public My commission expires: 30 TIME BROKERAGE AGREEMENT ATTACHMENT V If the notice is to Licensees, to It at: Multicultural Radio Broadcasting, Inc. 449 Broadway New York, New York 10013 Attention: Arthur Liu, President with a copy to: Mark N. Lipp, Esq. Shook, Hardy & Bacon, LLP 801 Pennsylvania Avenue, NW Suite 600 Washington, DC 20004 If the notice is to Broker: Nassau Broadcasting Partners, L.P. 619 Alexander Road, Third Floor Princeton, New Jersey 08540 Attention: Louis F. Mercatanti, Jr. with a copy to: Mark D. Schorr, Esq. Sterns & Weinroth A Professional Corporation 50 West State Street, Suite 1400 P.O. Box 1298 Trenton, New Jersey 08607-1298 EX-10.4 19 0019.txt LOCAL MARKETING AGMT, DTD 6/1/1997 Exhibit 10.4 LOCAL MARKETING AGREEMENT This Local Marketing Agreement (the "Agreement") dated as of June 1, 1997, by and between Great Scott Broadcasting, Ltd., a Pennsylvania Limited Partnership (hereinafter referred to as "Licensee") and Nassau Broadcasting Partners, L.P., a Delaware Limited Partnership (the "Broker"). WITNESSETH: WHEREAS, Licensee is authorized to operate Radio Stations WTTM/AM and WCHR/FM licensed to Trenton, New Jersey (hereinafter referred to as the "Stations"), pursuant to licenses issued by the Federal Communications Commission ("FCC"); WHEREAS, Licensee and Broker have entered into an Asset Purchase Agreement, dated August 30, 1996, as amended on January 17, 1997 and May 31, 1997 (collectively, the "Purchase Agreement"), pursuant to which the Licensee has agreed to sell to Broker all of the assets; WHEREAS, the parties hereto have carefully considered the FCC's time brokerage policies and intend that this Agreement in all respects comply with such policies; WHEREAS, Licensee desires to enter into this Agreement to sustain the operations of the Stations from January 1, 1999 until the Closing under the Purchase Agreement; WHEREAS, Broker desires to provide an over-the-air program service to Trenton, New Jersey, using the facilities of the Stations; WHEREAS, Licensee agrees to provide time on the Stations to Broker on terms and conditions that conform to the policies of the Stations and the FCC for time brokerage arrangements and as set forth herein; and WHEREAS, Broker agrees to utilize the facilities of the Stations solely to broadcast programming that conforms with the policies of the Licensee and with all rules, regulations and policies of the FCC and as set forth herein. NOW, THEREFORE, for and in consideration of the mutual covenants herein contained, the parties hereto have agreed and do agree as follows: 1. Facilities. Licensee agrees to make broadcasting transmission facilities of each of the Station available to Broker for a minimum of 158 hours per week (the "Minimum"), which will facilitate the broadcasting of Broker's programs (the "Programs"), which shall originate either from Broker's own studios or from Licensee's facilities or from other studios contracted for by Broker. The Programs are described in Attachment I hereto; provided, however, that the facilities made available to Broker shall not include the Stations' subcarrier(s) as long as it does not interfere with the principal signal. Licensee retains all rights to lease its subcarrier(s) and the radio towers utilized by the Stations. Broker and Licensee represent to each other that they have, and will have throughout the term of this Agreement, the capability or transmitting either by STL or phone lines from their respective broadcast and transmission studios. 2. Payments. Broker hereby agrees to pay Licensee for the broadcast of the programs hereunder, the sum of Seventy-Five Thousand Dollars ($75,000) per month payable on the first of each month during the term of this Agreement. The failure of Licensee to demand or insist upon prompt payment in accordance herewith shall not constitute a waiver of its right to such payment. Broker shall receive a payment credit for any programming, up to the Minimum, produced by it and preempted or not accepted by the Stations, such amount to be determined by multiplying the monthly payment by the ratio of the amount of time preempted or not accepted to the total number of broadcast hours up to the Minimum produced by Broker each month. 3. Term. This Agreement shall become effective on 12:00 a.m. Midnight January 1, 1998 (the "Effective Date") and shall terminate upon the earlier of (a) the Closing Date (as that term is defined in the Purchase Agreement) or (b) the time for termination specified in this Agreement. 4. Programs. Broker shall furnish or cause to be furnished the artistic personnel and material for the Programs as provided by this Agreement and all Programs shall be in good taste and in accordance with the rules, regulations and policies of the FCC. All Programs shall be prepared and presented in conformity with the regulations prescribed in Attachment III hereto. All. advertising spots and promotional material or announcements shall comply with all applicable federal, state and local regulations and policies. 5. Stations Facilities. 5.l Operation of Stations. Licensee represents that the Stations now operate and will continue to operate in accordance with the authorizations issued by the FCC. Throughout the term of this Agreement, Licensee shall make the Stations available to the Broker for operation with the maximum authorized facilities twenty-four (24) hours a day, seven (7) days a week, except for: (I) up to ten (10) hours per week for public affairs, news, information and other non-entertainment programming intended to address the needs and interest of the Stations' service area; (ii) down-time occasioned by routine maintenance not to exceed two (2) hours each Sunday morning between the hours of 12 Midnight and 6:00 a.m. Any routine maintenance work - 2 - affecting the operation of the Stations at full power shall be scheduled upon, if practicable, at least forty-eight (48) hours prior notice to Broker; and (iii) STL and phone lines as set forth in Paragraph 1 hereof. 5.2 Interruption of Normal Operations. (a) Except as provided in Paragraph 5.2(b), if any of the Stations suffer loss or damage of any nature to their transmission facilities which results in the interruption of service or the inability of any of the Stations to operate with their maximum authorized facilities, pursuant to the authorization under which the Stations are then operating, Licensee shall immediately notify Broker and shall undertake such repairs as necessary to restore the full-time operation of the Stations with their then maximum authorized facilities within thirty (30) days from the occurrence of such loss or damage. If such repairs are not made within the allotted period, Broker may give notice to Licensee of Broker's intention to terminate this Agreement, in which event this Agreement shall terminate on the thirtieth (30th) day following such notice, any other provision of this Agreement notwithstanding unless the repairs are made prior to the expiration of said thirty (30) day period. (b) If any of the Stations suffer loss or damage of any nature to their transmission facilities which results in the interruption of service or the inability of any of the Stations to operate with their maximum authorized facilities, pursuant to the authorization under which the Stations are then operating, and such loss or damage is a result of the actions, failure to act or negligence of Broker, Broker shall be solely responsible for the repair of the Station's transmission facilities and there shall be no reduction in the payments required under this Agreement or the Purchase Agreement during the period of such repairs. 6. Handling of Mail. Except as required to comply with the FCC rules and policies including those regarding the maintenance of the public inspection file (which shall at all time remain the responsibility of Licensee), Licensee shall not be required to receive or handle mail, cables, telegraph or telephone calls in connection with the Programs broadcast hereunder unless Licensee has agreed in writing to do so. 7. Programming and Operations Standards. Broker agrees to abide by the standards set forth in this Attachment III hereto in its programming and operations. Broker further agrees that if, in the sole judgment of Licensee, or the Stations' General Manager, Broker does not comply with said standards, Licensee may suspend or cancel any program not in compliance. 8. Responsibility for Employees and Expenses. Except as otherwise provided herein, Broker shall employ and be responsible for the salaries, taxes, insurance and related costs for all personnel used in the production of its programming and the -3 - broadcast transmission of the Programs (including, without limitation, salespeople, traffic personnel board operators and programming staff). Notwithstanding the foregoing, Licensee will provide and be responsible for the salaries, taxes, insurance, and related costs of the Station Manager and a staff person. Whenever on the Stations' premises, all personnel shall be subject to the supervision and the direction of Licensee's Station Manager. Broker shall reimburse Licensee for the salary, taxes, insurance and related costs for the Licensee's Station Manager and staff person, all, telephone calls associated with program production and listener responses, for all fees to ASCAP, BMI and SESAC, and for any other copyright fees attributable to its programming broadcast on the Stations. 9. Treatment of Licensee's Revenues. Broker shall retain all Licensee's revenues received on the Effective Date and during the term of this Agreement and shall reimburse Licensee for all expenses related to the operation of the Stations, including but not limited to the costs of the Station Manager and the staff person, insurance premiums, real estates taxes, maintenance and repair of personal property of Licensee ("Accounts Payable"). Broker's reimbursement shall occur not later than fifteen (15) days following presentment of an invoice, bill, or other request of payment in respect of any Account Payable. Licensee shall cooperate with Broker in order to ensure Broker receives all such revenues, including executing all assignments and other instruments necessary to insure such receipt. 10. Control of Station. Notwithstanding anything to the contrary in this Agreement, Licensee shall have full authority and power over the operations of the Stations during the period of this Agreement. Licensee shall provide and pay for the Station Manager of the Stations, who shall report and be accountable solely to Licensee and who shall direct the day-to-day operation of the Stations. Licensee shall retain control, said control to be reasonably exercised, over the policies, programming and operations of the Stations, including without limitation, the right to decide whether to accept or reject any programming or advertisements, the right to preempt any Programs in order to broadcast a program deemed by Licensee to be of greater national, regional or local interest, and the right to take any other actions necessary for compliance with the laws of the United States, the State of New Jersey, the rules, regulations and policies of the FCC, and the rules, regulations and policies of other federal governmental authorities, including the Federal Trade Commission and the Department of Justice. Licensee and Broker shall cooperate with one another in meeting all of the FCC's requirements with respect to public service programming, for maintaining the political and public inspection files of each of the Stations' logs and for the preparation of issues/Programs lists. Broker shall, upon request by Licensee, provide Licensee with information with respect to such of the Programs which are responsive to public needs and interest so as to assist Licensee in the preparation of required programming - 4 - reports and will provide, upon request, other information to enable Licensee to prepare other records, reports and logs required by the FCC or other local, state or federal governmental agencies. 11. Special Events. Licensee reserves the right, to preempt any of the broadcasts of the Programs referred to heroin and to use part or all of the time contracted for herein by Broker to broadcast special events of importance. In all such cases, Licensee will use its best efforts to give Broker reasonable notice of its intention to preempt such broadcast or broadcasts and, in the event of such preemption, Broker shall receive a payment credit for the broadcasts so omitted. In addition, Licensee shall be responsible for insuring that each of the Stations' identification announcements are broadcast in accordance with FCC requirements, and Broker shall cooperate with Licensee to facilitate such broadcasts. 12. Force Majeure. Any failure or impairment of facilities or any delay or interruption in broadcasting Programs or failure at any time to furnish facilities, in whole or in part, for broadcasting due to acts of God, strikes, or threats thereof, force majeure, or due to causes beyond the control of Licensee, shall not constitute a breach of this Agreement, and Licensee will not be liable to Broker. 13. Right to Use the Programs. The right to use the Programs produced by Broker and to authorize their use in any manner and in any media whatsoever shall be and remain vested in Broker. 14. Payola. Broker agrees that neither it nor any of its employees or agents will accept any compensation or any kind of gift or gratuity of any kind whatsoever, regardless of its value or form, including, but not limited to, a commission, discount, bonus, materials, supplies or other merchandise, services or labor, whether or not pursuant to written contracts or agreements between them and merchants or advertisers, unless, to the extent required by the FCC, the payer is identified in the program as having paid for or furnished such consideration. Broker agrees annually, or more frequently upon the request of Licensee, to provide Licensee with Payola Affidavits substantially in the form attached hereto as Attachment IV. 15. Compliance with Law. Broker agrees that, throughout the term of this Agreement, Broker will materially comply with all laws and regulations applicable in the conduct of Licensee's business, and Broker acknowledges that Licensee has not urged, counseled or advised the use of any unfair business practice. 16. Political Advertising. Broker shall cooperate with Licensee as Licensee complies with the political broadcasting requirements of the Federal Communications Act of 1934, as amended (the "Act") and the FCC's rules and policies thereunder. - 5 - Broker shall supply such information promptly to Licensee as may be necessary to comply with the lowest unit charge requirements of Section 315 of the Act. To the extent that Licensee believes necessary, in Licensee's sole discretion, Broker shall release advertising availabilities to Licensee to permit it to comply with its reasonable access provisions of Section 312(a) (7) of the act, the equal opportunities provision of Section 31 of the Act, and the rules and policies of the FCC thereunder; provided, however, that all revenues realized by Licensee as a result of such a release of advertising time shall promptly be remitted to Broker. In any event, with respect to the Stations, Licensee must oversee and take ultimate responsibility with respect to the provision of equal opportunities, lowest unit charge, and reasonable access to political candidates, and compliance with the political broadcast rules and policies of the FCC. 17. Indemnification; Warranty. Broker will indemnity and hold Licensee harmless against all liability for its material breach of representations, warranties or covenants as well as for libel, slander, illegal competition or trade practice, infringement of trademarks, trade names or program titles, violative of rights of privacy, and infringement of copyrights and proprietary rights resulting from the broadcast of Programs furnished by Broker. Further, Broker warrants that the broadcasting of the Programs will not violate any rights of others, and Broker agrees to hold Licensee harmless from any and all claims, damages, liability, costs and expenses, including reasonable attorneys' fees, arising from the broadcasting of the Programs. Licensee reserves the right to refuse to broadcast any Programs containing matter which is or, in the reasonable opinion of Licensee, may be, or which a third-party claims to be, violation of any right of Licensee of which may constitute a personal attack as the term is and has been defined by the Commission. Broker's obligation to hold Licensee harmless against the liabilities specified above shall survive any termination of this Agreement until the expiration of all applicable statutes of limitation. Reciprocally, Licensee shall indemnify and hold Broker harmless against all liability for its material breach of representations, warranties or covenants as well as for libel, slander, illegal competition or trade practices, infringement or trademarks, trade names or program titles, violative of rights or privacy and infringement of copyrights and proprietary rights resulting from programming furnished by Licensee. Further, Licensee warrants that the broadcasting of the Programs will not violate any rights of others, and Licensee agrees to hold Broker harmless for any loss, damage or injury or any kind (including reasonable legal fees and related costs) arising from the broadcast of programming on the Stations furnished by Licensee. Licensee's obligation to hold Broker harmless against the liabilities specified above shall survive any termination of this Agreement until the expiration of the applicable statute of limitations. - 6 - 18. Events of Default; Cure Periods and Remedies. 18.1 Events of Default. The following shall, after the expiration of the applicable cure periods, constitute Events of Default under the Agreement: 18.1.1 Non-Payment. Broker's failure to timely pay the consideration provided for in Paragraph 2 hereof; or 18.1.2 Default in Covenants or Adverse Legal Action. The default by either party hereto in the material observance or performance of any material covenant, condition or agreement contained herein or in the Purchase Agreement, or if either party shall (a) make a general assignment for the benefit of creditors, (b) files or has filed against it a petition for bankruptcy, for reorganization or for the appointment of a receiver, trustee or similar creditors' representative for the property or assets of such party under any federal or state insolvency law, which, if filed against such party, has not been dismissed or discharged within sixty (60) days thereof; or 18.1.2 Breach of Representation. If any material representation or warranty herein made by either party hereto or in any certificate or document furnished by either party to the other pursuant to the provisions hereof shall prove to have been false or misleading in any material respect as of the time made or furnished; or 18.1.4 Substitution of Programming. If, other than the hours described in Section 5.1(i) hereof, Licensee preempts or substitutes other programming for that supplied by Broker during five and one-half (5.5%) percent or more of the total hours of operation of each of the Stations during any calendar month. 18.2 Cure Periods. An Event of Default shall not be deemed to have occurred until twenty-five (25) business days, or fifteen (15) days in the event of a monetary default, after the non-defaulting party has provided the defaulting party with written notice specifying the event or events that, if nor cured, would constitute an Event of Default and specifying the actions necessary to cure within such period. This period may be extended for a reasonable period of time if the defaulting party is acting in good faith to cure and such delay is not materially adverse to the other party. 18.3 Termination Upon Default. In the event of the occurrence of an Event of Default pursuant to this Agreement or the Purchase Agreement, the non-defaulting party may terminate this Agreement and/or the Purchase Agreement after any relevant cure period provided herein or therein if that party is not also in material default pursuant to this Agreement or the Purchase Agreement. If Licensee terminates this Agreement because Broker - 7 - has defaulted in the performance of its obligations under this Agreement or the Purchase Agreement, Licensee shall be under no further obligation to make available to Broker any further broadcast time or broadcast transmission facilities and all amounts accrued or payable to Licensee up to the date of termination which have not been paid, less any payments made on behalf of Licensee by Broker and any payment, credits, shall immediately become due and payable. 18.4 Liabilities Upon Termination. Broker shall be responsible for all liabilities, debts and obligations of Broker accrued from the purchase of air time and use of transmission facilities, including, without limitation, Broker's accounts payable, barter agreements and unaired advertisements, but not for Licensee's federal, state and local tax liabilities associated with Broker's payments to Licensee as provided herein. With respect to Broker's obligations for consideration in the form of air time, Broker may propose compensation to Licensee for meeting these obligations, but Licensee shall be under no duty to accept such compensation or to perform such obligations. 19. Termination Upon Order of Governmental Authority. The parties intend that this Agreement shall comply with all applicable federal, state and local regulations. In the event that a federal, state or local governmental authority designates a hearing with respect to the continuation or renewal of any licenses, permits or authorizations held by Licensee for the operation of each of the Stations or order the termination of this Agreement and/or the curtailment in any manner material to the relationship between the parties hereto of the provision of programming by Broker hereunder, Broker, at its option, may seek administrative or judicial appeal of or relief from such order(s) (in which event Licensee shall cooperate with Broker provided that Broker shall be responsible for legal fees incurred in such proceedings) or Broker shall notify Licensee that they will terminate this Agreement in accordance with such order(s). If the FCC designates any renewal application of the Stations for a hearing or commences a hearing to consider revocation of any license or permit for the Stations as a consequence of this Agreement or for any reason other that the fault of Broker, Licensee shall be responsible for expenses they incur as a consequence of the FCC proceeding; provided however, that Broker shall cooperate and comply with any reasonable request of Licensee to assemble and provide to the FCC information relating to Broker's performance under this Agreement. In the event of a termination upon such governmental order(s), Broker shall pay to Licensee any fees due but unpaid as of the date of termination unless prohibited by such order(s), and Licensee shall reasonably cooperate with Broker to the extent permitted to enable Broker to fulfill advertising or other programming contracts then outstanding, in which event Licensee shall receive as compensation for such advertising or programming that which otherwise would have been paid to Broker thereunder. Thereafter, neither party shall have any liability to the other under the - 8 - Agreement except as may be provided pursuant to Paragraph 18 hereof. 20. Representations and Warranties. 20.1 Mutual Representations and Warranties. Licensee and Broker represent that they are legally qualified, empowered and able to enter into this Agreement, and that the execution, delivery and performance hereof shall not constitute a breach or violation of any agreement, contract or undertaking to which any party is subject or by which it is bound. Licensee and Broker warrant, represent, covenant and certify that Licensee maintains, and shall continue to maintain, ultimate control over each of the Stations' facilities during the term of this Agreement, including without limitation, control over each of the Stations' finances, personnel and programming. Licensee and Broker represent and warrant that they have taken all necessary corporate and other action to make this Agreement legally binding on such party, and that the individuals signing this Agreement on their behalf have been fully authorized and empowered to execute this Agreement. 20.2 Licensee's Representations, Warranties and Covenants. Licensee makes the following further representations, warranties and covenants: 1. Authorization. Licensee holds and owns all licenses and other permits and authorizations necessary for the operation of each of the Stations as presently conducted (including licenses, permits and authorizations issued by the FCC), and such licenses, permits and authorizations will be in full force and effect for the entire term hereof, unimpaired by any acts or omissions of Licensee or of any of their principals, employees, or agents. 2. Litigation. Except as set forth in Schedule 4(g) of the Purchase Agreement, there is not now pending or, to the knowledge of Licensee, threatened, any action by the FCC or any other party to revoke, cancel, suspend, refuse to renew or modify adversely, any of the licenses, permits or authorizations necessary to the operation of each of the Stations (other than proceedings of general applicability to the radio broadcast industry). Licensee has no reason to believe that any such license, permit or authorization will not be renewed in its ordinary course. 20.3 Broker's Representations, Warranties and Covenants. The Broker hereby verifies that the arrangement contemplated by this Agreement complies with the ownership limitations set forth in the Telecommunications Act of 1996, as adopted February 8, 1996. 21. FCC Compliance. Notwithstanding anything herein contained to the contrary, this Agreement, any related agreements and the parties performance hereunder and thereunder (i) do not -9- and will not constitute, create, or have the effect of constituting or creating, directly or indirectly, actual or practical ownership of Licensee or any of the Stations by Broker or control, affirmative or negative, direct or indirect, by the Broker over the programming, management, or any other aspect for the operation of the Licensee or any of the Stations, which ownership and control will remain exclusively and at all times in the Licensee; and (ii) do not and will not constitute the transfer, assignment, or disposition in any manner, voluntarily or involuntarily, directly or indirectly, of any license or permit at any time issued by the FCC to the Licensee or the transfer of control of the Licensee within the meaning of Section 310(d) of the Act, without the FCC's necessary prior written consent having been obtained. 22. Modification and Waiver. No modification or waiver of any provision of this Agreement shall in any event be effected unless the same shall be in writing and signed by the party adversely affected by the waiver or modification, and then such waiver and consent shall be effective only in the specific instance and for the purpose for which given. 23. No Waiver; Remedies Cumulative. No failure or delay on the part of Licensee or Broker in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of Licensee and Broker herein provided are cumulative and are not exclusive of any right or remedies which they may otherwise have. 24. Construction. This Agreement shall be construed in accordance with the laws of the State of New Jersey, and the obligations of the parties hereto are subject to all federal, state or municipal laws or regulations now or hereafter in force and to the regulations of the FCC and all other governmental bodies or authorities presently or hereafter to be constituted. 25. Headings. The headings contained in this Agreement are included for convenience only and no such heading shall in any way alter the meaning of any provision. 26. Successors and Assigns. This Agreement shall be binding upon inure to the benefit of the parties and their respective successors and assigns, including, without limitation, any assignee of the Licensee for the FCC licenses for the Stations. Licensee and Broker shall not be permitted to assign this Agreement without obtaining the consent of the other party, which consent may be withheld for any reason whatsoever. 27. Counterpart Signatures. This Agreement may be signed in one or more counterparts, each of which shall be deemed a duplicate original, binding on the parties hereto notwithstanding - 10 - that the parties are not signatory to the original or the same counterpart. 28. Notices. Any notice required hereunder shall be in writing and any payment, notice or other communications shall be deemed given when delivered personally or mailed by certified mail or Federal Express, postage prepaid, with return receipt requested, and addressed in accordance with the listing set forth in Attachment V hereto. If mailed, notice shall be deemed given three (3) days after it is mailed. 29. Entire Agreement. This Agreement, which includes the attached Exhibits and Schedules and the Purchase Agreement, embodies the entire agreement between the parties and there are no other agreements, representations, warranties or understandings, oral or written, between them with respect to the subject matter hereof. No alterations, modification or change of this Agreement shall be valid unless by like written instrument. 30. No Partnership or Joint Venture Created. Nothing in this Agreement shall be construed to make Licensee and Broker partners or joint venturers of the other. None of the parties hereto shall have the right to bind the others to transact any business in the other's name or on its behalf, in any form or manner or to make any promises or representations on behalf of the other except as expressly provided for herein. 31. Severability. In the event that any of the provisions contained in this Agreement are held to be invalid, illegal or unenforceable it shall not affect any other provision hereof and this Agreement shall be construed as if such invalid, illegal or unenforceable provisions had not been contained herein. - 11 - IN WITNE8S WHEREOF, the parties have executed this Agreement as of the date first above written. GREAT SCOTT BROADCASTING, LTD. By: GREAT SCOTT COMMUNICATIONS, INC., its General Partner By: /s/ Faye Scott ----------------------------------- Faye Scott, President NASSAU BROADCASTING PARTNERS' L.P. By: Nassau Broadcasting Holdings, Inc., its general partner By: /s/ Louis F. Mercatanti, Jr. ----------------------------------- Louis F. Mercatanti, Jr., President - 12 - TIME BROKERAGE AGREEMENT ATTACHMENT I Provided Broker makes all payments to Licensee required to be made by January 1, 1998 pursuant to the Purchase Agreement, on and after January 1, 1998, Broker will broadcast an adult contemporary entertainment format which may include news as well as promotions (including on-air giveaways) and contests. Programming provided by Broker may include commercial matter, including that in both program or spot announcement forms, as well as entertainment and public service programming. - 13 - TIME BROKERAGE AGREEMENT ATTACHMENT II INTENTIONALLY BLANK - 14 - TIME BROKERAGE AGREEMENT ATTACHMENT III Broker agrees to cooperate with Licensee in the broadcasting of Programs of the highest possible standard of excellence and of this purpose to observe the following regulations in the preparation, writing and broadcasting of its Programs: I. Respectful of Faiths. The subject of religion and references to particular faiths, tenets and customs shall be treated with respect at all times. II. No Denominational Attacks. Programs shall not be used as a medium for attack on any faith, denomination or sect or upon any individual or organization. III. Controversial Issues. Any discussion of controversial issues of public importance shall be reasonably balanced with the presentation of contrasting viewpoints in the course of overall programming; no attacks on the honesty, integrity or like personal qualities of any person or group of persons shall be made during the discussion of controversial issues of public importance; and during the course of political campaigns, Programs are not to be used as a forum for editorializing about individual candidates. If such events occur, Licensee may require the responsive programming be aired. IV. Donation Solicitation. Requests for donations in the form of a specific amount, for example, $1.00 to $5.00, shall not be made if there is any suggestion that such donation will result in miracles, cures or prosperity. However, statements generally requesting donations to support the broadcast or church may be permitted. V. No Ministeria1 Solicitations. No invitations by a minister or other individual appearing on the program to have listeners come and visit him or her for consultation of the like shall be made if such invitation implies that the listeners will receive consideration, monetary gain or cures for illness. VI. No Vending of Miracles. Any exhortation to listeners to bring money to a church affair or service is prohibited if the exhortation, affair or service contains any suggestion that miracles, cures or prosperity will result. VII. Sale of Religious Artifacts. The offering for sale of religious artifacts or other items for which listeners would send money is prohibited unless such items are readily available in ordinary commerce or are clearly being sold for legitimate fundraising purposes. - 15 - VIII. No Miracle Solicitation. Any invitations to listeners to meet at places other than the church and/or attend other than regular services of the church is prohibited if the invitation, meeting or service contains any claim that miracles, cures or prosperity will result. IX. No Claims of Undocumented Miracles. Any claims of miracles or cures not documented in biblical scripture and quoted in context are prohibited; e.g., this prohibits the minister and/or other individual appearing on the program from personally claiming any cures or miracles and also prohibits the presentation of any testimonials regarding such claims, either in person or in writing. X. No Plugola or Payola. The mention of any business activity or "plug" for any commercial, professional or other related endeavor, except where contained in an actual commercial message of a sponsor, is prohibited. XI. No Lotteries. Announcements giving any information about lotteries or games prohibited by federal or state law or regulation are prohibited. XII. No "Dream Books". References to "dream books", the "straight line" or other direct or indirect descriptions or solicitations relative to the "numbers game" or the "policy game" or any other form of gambling are prohibited. XIII. No Numbers Games. References to chapter and verse numbers, paragraph numbers or song numbers which involve three (3) digits should be avoided and, when used, must relate to the overall theme of the program. XIV. Election Procedures. At least ninety (90) days before the start of any primary or regular election campaign, Broker will clear with Licensee's General Manager the rate Broker will charge for the time to be sold to candidates for public office and/or their supporters to make certain that the rate charged conforms to all applicable laws and Station policy. XV. Spot Commercial Limitations. With respect to any given segment or air time hereunder, the amount of spot commercial matter shall not exceed twenty (20) minutes during any sixty (60) minute segment. Broker will provide, for attachment to each of the Stations' logs, a list of all commercial announcements carried during its programming. XVI. Required Announcements. Broker shall broadcast (i) an announcement in a form satisfactory to Licensee at the beginning of each hour to identify Station call letters, (ii) an announcement at the beginning and end of each program and hourly, as appropriate, to indicate that program time has been purchased by Broker, and (iii) any other announcement that may be required by law, regulation or Station policy. - 16 - XVII. Credit Terms Advertising. Pursuant to rules of the Federal Trade Commission, no advertising of credit terms shall be made over the Station beyond mention of the fact that, if desired, credit terms are available. XVIII. Commercial Recordkeeping. Broker shall not receive any consideration in violation of the FCC's sponsorship identification rule and the anti-payola provisions of the Communications Act. No commercial messages ("plugs") or undue references shall be made in programming presented over each of the Stations to any business venture, profit-making activity, or other interest (other than non-commercial announcement for bona fide charities, church activities or other public service activities) in which Broker (or anyone else) is directly or indirectly interested without the same having been approved in advance by Licensee's General Managers and such broadcast being announced and logged and sponsored. XIX. No Illegal Announcements. No announcements or promotion prohibited by federal or state law or regulation of any lottery game shall be made over each of the Stations. Any game, contest or promotion relating to or to be presented over the Stations must be fully stated and explained in advance to Licensee which reserves the right, in its sole discretion, to reject any game, contest or promotion. XX. Programming Prohibitions. Broker shall not knowingly broadcast any of the following Programs or announcements: A. False Claims. False or unwarranted claims for any product or service. B. Unfair Imitation. Infringements or another advertiser's rights through plagiarism or unfair limitation or either program idea or copy, or any other unfair competition. C. Commercial Disparagement. Any disparagement of competitors or competitive goods. D. Profanity. Any Programs or announcements that are slanderous, obscene, profane, vulgar, repulsive or offensive, either in them or treatment. E. Price Disclosure. Any price mentions except as permitted by Licensee's policies current at the time. F. Descriptions of Bodily Functions. Any programming which describes in a repellent manner internal bodily functions or symptomatic results or internal disturbances. G. Unauthenticated Testimonials. Any testimonials which cannot be authenticated. - 17 - H. Conflict Advertising. Any advertising matter or announcement which may, in the opinion of Licensee, be injurious or prejudicial to the interests of the public, each of the Stations, or honest advertising and reputable business in general. Licensee, may waive any of the foregoing regulations in specific instances if, in its reasonable opinion, good broadcasting in the public interest will be served thereby. In any case where questions of policy or interpretation arise, Broker shall submit the same to Licensee for decision before making any commitments in connection therewith. - 18 - TIME BROKERAGE AGREEMENT ATTACHMENT IV County of State of New Jersey ANTI-PAYOLA/PLUGOLA AFFIDAVIT Louis F. Mercatanti, Jr., being first duly sworn, deposes and says as follows: 1. He is the President of the General Partner for Nassau Broadcasting Partners, L.P. ("Broker"). 2. He has acted in the above capacity since ____________. 3. No matter has been provided for broadcast by Stations WTTM (AM) and WCHR (FM) (hereinafter collectively referred to as the "Stations"), for which service, money or other valuable consideration has been directly or indirectly paid, or promised to, or charged, or accepted, by him from any person, which matter at the time so broadcast has not been announced or otherwise indicated as paid for or furnished by such person. 4. So far as he is aware, no matter has been provided for broadcast by the Stations for which service, money or other valuable consideration has been directly or indirectly paid, or promised to, or charged, or accepted by the Stations by the Broker, or by any independent contractor engaged by the Broker in furnishing Programs, from any person, which matter at the time so broadcast has not been announced or otherwise indicated as paid for or furnished by such person. 5. In the future, he will not pay, promise to pay, request or receive any service, money or any other valuable consideration, direct or indirect, from a third-party in exchange for the influencing or, or the attempt to influence, the preparation or presentation of broadcast matter on the Stations. 6. Except as may be reflected in Paragraph 7 hereof, neither he, his spouse nor any member of his immediate family, has any present, direct or indirect, ownership interest in any entity engaged in the following business or activities (other than an investment in a corporation whose stock is publicly held), serves as an officer of director of, whether with or without compensation, or serves as an employee of, any entity engaged in the following business or activities: - 19 - a. the publishing of music; b. the production, distribution (including wholesale and retail sales outlets), manufacture or exploitation of music, films, tapes, recordings or electrical transcriptions of any program material intended for radio broadcast use; c. the exploitation, promotion or management of persons rendering artistic production and/or services in the entertainment field; d. the ownership or operation of one or more radio or television stations; e. the wholesale or retail sale of records intended for public purchase; and f. the sale of advertising time other than on the Stations of any other station owned by the Broker. 7. A full disclosure of any such interest referred to in Paragraph 6 above is as follows: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________ Affiant Subscribed and sworn to before me this ____ day of _____________, 1997 ____________________________________ Notary Public My commission expires:______________ - 20 - TIME BROKERAGE AGREEMENT ATTACHMENT V If the notice is to Licensee, to it at: Mrs. Faye Scott 1018 Timber Lane Pottstown, PA 19464 Persona1 & Confidential and Mr. Mitchell Scott 1018 Timber Lane Pottstown, PA 19464 Personal & Confidential with a copy to: Bernard Eizen, Esquire Eizen Fineburg & McCarthy Two Commerce Square, Suite 3410 2001 Market Street Philadelphia, PA 19103 If the notice is to Broker: Nassau Broadcasting Partners, L.P. 600 Alexander Road Princeton, New Jersey 08540 Attention: Louis F. Mercatanti, Jr. with a copy to: Sterns & Weinroth A Professional Corporation 50 West State Street, Suite 1400 P.O. Box 1298 Trenton, New Jersey 08607-1298 Attention: Mark D. Schorr - 21 AMENDMENT TO LOCAL MARKETING AGREEMENT THIS AMENDMENT ("Amendment") is dated and effective as of the 25th day of November. 1998, by and between GREAT SCOTT BROADCASTING, LTD., a Pennsylvania limited partnership ("Licensee"), and NASSAU BROADCASTING PARTNERS, L.P., a Delaware limited partnership ("Broker"). STATEMENT OF FACTS 1. Broker and Licensee entered into a Local Marketing Agreement dated as of June 1, 1997 ("Original Local Marketing Agreement") pursuant to which Licensee agreed to provide time on certain radio stations licensed to Trenton, New Jersey to Broker, who in turn agreed to pay for such time and use it to provide an over-the-air program service to Trenton, New Jersey. 2. Licensee and Broker have entered into an Asset Purchase Agreement, dated August 31, 1996, as amended on January 17, 1997, May 31, 1997, February 17, 1998 and November 25, 1998 (collectively, the "Asset Purchase Agreement"), pursuant to which Licensee has agreed to sell to Broker all of the Assets. 3. Licensee and Broker have agreed to amend the Original Local Marketing Agreement to take into account certain changes made to the Asset Purchase Agreement in connection with the execution of the Fourth Amendment to the Asset Purchase Agreement, dated and effective as of November 25, 1998. AGREEMENT NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00), paid by Broker to Licensee, and for other good and valuable consideration, the mutual receipt and mutual sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Section 3 of the Original Local Marketing Agreement shall be deleted in its entirety and replaced by the following: "3. Term. This Agreement shall become effective on 12:00 a.m. Midnight January 1, 1998 (the "Effective Date") and shall terminate upon the first to occur of: a. the New Closing date, as defined in the Asset Purchase Agreement (as amended), if Section 3 of the Fourth Amendment is inapplicable; b. the Escrow Release Date, as defined in the Asset Purchase Agreement if Section 3 of the Fourth Amendment is operative; c. the time for termination specified in Paragraph 18 of this Agreement; or d. the time for termination specified in Paragraph 4 of the Fourth Amendment to the Asset Purchase Agreement." 2. The Original Local Marketing Agreement, in all other respects, is hereby ratified, affirmed and republished as if set forth herein at length. [SIGNATURES ARE AFFIXED TO THE FOLLOWING PAGE] 2 IN WITNESS WHEREOF, this Amendment has been duly executed by the parties hereto as of the date first above written. GREAT SCOTT BROADCASTING, LTD. By: GREAT SCOTT COMMUNICATIONS, INC., It's General Partner By: /s/ Faye Scott ----------------------------------- Faye Scott, President NASSAU BROADCASTING PARTNERS L.P. By: Nassau Broadcasting Partners, Inc., It's General partner By: /s/ Louis F. Mercatanti, Jr. ----------------------------------- Louis F. Mercatanti, Jr., President EX-10.5 20 0020.txt TIME BROKERAGE AGMT, DTD 8/1/1998 Exhibit 10.5 TIME BROKERAGE AGREEMENT THIS TIME BROKERAGE AGREEMENT (the "Agreement") dated as of August 1, 1998, by and between PORT JERVIS BROADCASTING CO., INC. , a New York Corporation (hereinafter referred to as "Licensee") and NASSAU BROADCASTING PARTNERS, L.P., a Delaware limited partnership ("Broker"). WITNESSETH: WHEREAS, Licensee is authorized to operate radio stations WDLC-AM and WTSX-FM, licensed to Port Jervis, New York (hereinafter referred to as the "Stations"), pursuant to licenses issued by the Federal Communications Commission ("FCC"); WHEREAS, Licensee and Broker have entered into an Option Agreement, dated of even date (the "Option Agreement"), pursuant to which Licensee has granted to Broker an option to purchase all of the assets of Licensee used in connection with the operation of the Stations; WHEREAS, the parties hereto have carefully considered the FCC's time brokerage policies and intend that this Agreement in all respects comply with such policies; WHEREAS, Licensee desires to enter into this Agreement to provide an interim source of diverse programming and income to sustain the operations of the Stations until the Closing under the Option Agreement; WHEREAS, Broker desires to provide an over-the-air program service to Licensee, using the facilities of the Stations; 1 WHEREAS, Licensee agrees to provide time on the Stations to Broker on terms and conditions that conform to the policies of the Stations and the FCC for time brokerage arrangements and as set forth herein; and WHEREAS, Broker agrees to utilize the facilities of the Stations solely to broadcast programming that conforms with the policies of the Licensee and with all rules, regulations and policies of the FCC and as set forth herein. NOW, THEREFORE, for and in consideration of the mutual covenants herein contained, the parties hereto have agreed and do agree as follows: 1. FACILITIES. Licensee agrees to make the broadcasting transmission facilities of the Stations available to Broker for a minimum of 158 hours per week (the "Minimum"), which will facilitate the broadcasting of Broker's programs (the "Programs"), which shall originate either from Broker's own studios or from Licensee's facilities or from other studios contracted for by Broker. The Programs are described in ATTACHMENT I hereto; PROVIDED, HOWEVER, that the facilities made available to Broker shall not include the Stations' subcarrier(s) as long as it does not interfere with the principal signal. Licensee retains all rights to lease its subcarrier(s); PROVIDED, HOWEVER, that any lease entered into by Licensee shall be terminable by Licensee upon thirty (30) days notice. Broker and Licensee represent to each other that they have, and will have throughout the term of this Agreement, the capability of transmitting either by STL or phone lines from their respective broadcast and transmission studios. 2. PAYMENTS. (a) Broker hereby agrees to pay Licensee for the broadcast of the programs hereunder, Monthly Fee as set forth in Section 2(b), and subject to increase set forth in Section 2(c), payable on the first of each month during 2 the term of this Agreement. The failure of Licensee to demand or insist upon prompt payment in accordance herewith shall not constitute a waiver of its right to such payment. Broker shall receive a payment credit for any programming, up to the Minimum, produced by it and not broadcast by the Stations, such amount to be determined by multiplying the monthly payment by the ratio of the amount of time preempted or not accepted to the total number of broadcast hours up to the Minimum produced by Broker each month. (b) The Monthly Fee shall be payable on the 7th day of each month as follows: (1) $10,000 per month from August 1, 1998 through October 31, 1998; (2) $10,000 per month from November 1, 1998 through January 31, 1999; provided, however, if Robert DeFelice is not employed at the Stations after November 1, 1998, the amount shall be increased to $12,000 per month; (3) $12,500 per month from February 1, 1999 through July 31, 1999; (4) $15,000 per month from August 1, 1999 through January 31, 2000; (5) $20,000 per month from February 1, 2000 through July 31, 2000; and (6) $25,000 per month from August 1, 2000 through July 31, 2001. (c) Commencing on November 1, 1998, in the event that 20% of the net revenues of the Stations exceeds the minimum payment as set forth in subparagraphs (b)(2) through (b)(6) in any calendar month, the Monthly Fee payable for that calendar month shall be increased to an amount equal to 20% of the net revenues. The excess fee shall be payable on the first day of the calendar month following the month in which the net revenues exceeded such amount. 3 (d) Broker shall be entitled to a reasonable participation in any trades entered into by Licensee. 3. TERM. This Agreement shall become effective as of thedate hereof and shall terminate upon the earlier of: (a) the Closing Date (as that term is defined in the Option Agreement); or (b) three years from the effective date of the Option Agreement; or (c) the date of termination, if terminated, pursuant to the provisions of this Agreement. 4. PROGRAMS. Broker shall furnish or cause to be furnished the artistic personnel and material for the Programs as provided by this Agreement and all Programs shall be in good taste and in accordance with the rules, regulations and policies of the FCC. All Programs shall be prepared and presented in conformity with the regulations prescribed in ATTACHMENT III hereto. All advertising spots and promotional material or announcements shall comply with all applicable federal, state and local regulations and policies. 5. STATIONS FACILITIES. 5.1 OPERATION OF STATIONS. Licensee represents that the Stations now operate and will continue to operate in accordance with the authorizations issued by the FCC. Throughout the term of this Agreement, Licensee shall make the Stations available to the Broker for operation with the maximum authorized facilities twenty-four (24) hours a day, seven (7) days a week, except for: (i) up to ten (10) hours per week for public affairs, news, information and other non-entertainment programming intended to address the needs and interests of the Stations' service area; and (ii) down-time occasioned by routine maintenance not to exceed two (2) hours each Sunday morning 4 between the hours of 12 Midnight and 6:00 a.m. Broker may operate the Stations by STL and phone lines, as set forth in Paragraph 1 hereof. Broker shall be responsible reimbursing Licensee for costs of all maintenance and repairs and replacement of equipment during the term of this Agreement. In the event that Broker does not exercise the Option (as defined in the Option Agreement), Licensee shall be entitled to conduct an engineering inspection within thirty (30) days of the expiration of the Option Period (as defined in the Option Agreement). If such engineering inspection reveals that the Stations are not in substantially the same condition as on the date of this Agreement, other than normal wear and tear, Broker shall be responsible for correcting any deficiencies in the Stations. 5.2 INTERRUPTION OF NORMAL OPERATIONS. If any of the Stations suffer loss or damage of any nature to their transmission facilities which results in the interruption of service or the inability of any of the Stations to operate with their maximum authorized facilities, pursuant to the authorization under which the Stations are then operating, Licensee shall immediately notify Broker and shall undertake such repairs as necessary to restore the full-time operation of the Stations with their then maximum authorized facilities within thirty (30) days from the occurrence of such loss or damage. If such repairs are not made within the allotted period, Broker may give notice to Licensee of Broker's intention to terminate this Agreement and/or the Option Agreement, in which event this Agreement and/or the Option Agreement shall terminate on the thirtieth (30) day following such notice, any other provision of this Agreement notwithstanding, unless the repairs are made prior to the expiration of said thirty (30) day period. 5 6. HANDLING OF MAIL. Except as required to comply with the FCC rules and policies, including those regarding the maintenance of the public inspection file (which shall at all times remain the responsibility of Licensee), Licensee shall not be required to receive or handle mail, cables, telegraph or telephone calls in connection with the Programs broadcast hereunder unless Licensee has agreed in writing to do so. 7. PROGRAMMING AND OPERATIONS STANDARDS. Broker agrees to abide by the standards set forth in this ATTACHMENT III hereto in its programming and operations. Broker further agrees that if, in the sole judgment of Licensee, Broker does not comply with said standards, Licensee may suspend or cancel any program not in compliance. 8. RESPONSIBILITY FOR EMPLOYEES AND EXPENSES. Broker shall employ and be responsible for the salaries, taxes, insurance and related costs for all personnel used in the production of its programming (including salespeople, traffic personnel, board operators and programming staff). Licensee will provide and be responsible for the Stations' personnel necessary for the broadcast transmission of the Programs, including, without limitation, a full-time station manager (the "Station Manager") and will be responsible for the salaries, taxes, insurance and related costs for all the Stations' personnel used in the broadcast transmission of the Programs. Whenever on the Stations' premises, all personnel shall be subject to the supervision and the direction of the Station Manager. Broker shall reimburse Licensee $4,000 per month for the salary, taxes, insurance and related costs for the Station Manager, $3,000 per month from August 1, 1998 through October 31, 1998 for the salary of Robert DeFelice, all telephone calls associated with program production and listener responses, all fees to 6 ASCAP, BMI and SESAC, and any other copyright fees attributable to its programming broadcast on the Stations. 9. TREATMENT OF LICENSEE'S REVENUES. During the 90-day period following the Effective Date (the "Collection Period"), Broker shall act as Licensee's agent in collecting the Accounts Receivable of Broker which accrued prior to the Effective Date. Licensee shall deliver to Broker on the Effective Date any power of attorney necessary for such collection. Broker shall collect the Accounts Receivable without commission or compensation, and five (5) business days following the end of each month during the Collection Period, Broker shall remit to Licensee all amounts collected by Broker for the Accounts Receivable without offset or deduction, less one-third of all exising advertising credits in each month during the Collection Period, which shall be retained by Licensee to offset any trade-outs or pre-paid advertising. Without the express written consent of Licensee, Broker shall not compromise or settle for less than full value any Accounts Receivable. Broker shall not incur any liability as the result of failure to collect any Accounts Receivable and shall not be required to incur any expense or institute suit (or engage in any dunning) to collect any Accounts Receivable. Broker and Licensee shall cooperate to facilitate Broker's collection of the Accounts Receivable hereunder (e.g., by execution and delivery of necessary powers of attorney for the deposition of checks). Commencing on November 1, 1998, and during the term of this Agreement, Broker shall retain all of Licensee's revenues. Broker shall reimburse Licensee for all expenses related to the operation of the Stations, including but not limited to the costs of the Station Manager as set forth in Paragraph 8, insurance premiums, real estates 7 taxes, maintenance and repair of personal property of Licensee ("Accounts Payable"). 10. CONTROL OF STATION. Notwithstanding anything to the contrary in this Agreement, Licensee shall have full authority and power over the operations of the Stations during the period of this Agreement. Licensee shall provide and pay for the Station Manager, who shall report and be accountable solely to Licensee and who shall direct the day-to-day operation of the Stations. Licensee shall retain control, said control to be reasonably exercised, over the policies, programming and operations of the Stations, including, without limitation, the right to decide whether to accept or reject any programming or advertisements, the right to preempt any Programs in order to broadcast a program deemed by Licensee to be of greater national, regional or local interest, and the right to take any other actions necessary for compliance with the laws of the United States, the State of New York, the rules, regulations and policies of the FCC, and the rules, regulations and policies of other federal governmental authorities, including the Federal Trade Commission and the Department of Justice. Licensee and Broker shall cooperate with one another in meeting all of the FCC's requirements with respect to public service programming, for maintaining the political and public inspection files of each of the Stations' logs, and for the preparation of issues/Programs lists. Broker shall, upon request by Licensee, provide Licensee with information with respect to such of the Programs which are responsive to public needs and interest so as to assist Licensee in the preparation of required programming reports and will provide, upon request, other information to enable Licensee to prepare other records, 8 reports and logs required by the FCC or other local, state or federal governmental agencies. 11. SPECIAL EVENTS. Licensee reserves the right, to preempt any of the broadcasts of the Programs referred to herein and to use part or all of the time contracted for herein by Broker to broadcast special events of importance. In all such cases, Licensee will use its best efforts to give Broker reasonable notice of its intention to preempt such broadcast or broadcasts and, in the event of such preemption, Broker shall receive a payment credit for the broadcasts so omitted. In addition, Licensee shall be responsible for insuring that each of the Stations' identification announcements are broadcast in accordance with FCC requirements, and Broker shall cooperate with Licensee to facilitate such broadcasts. 12. FORCE MAJEURE. Any failure or impairment of facilities or any delay or interruption in broadcasting Programs or failure at any time to furnish facilities, in whole or in part, for broadcasting due to acts of God, strikes, or threats thereof, force MAJEURE, or due to causes beyond the control of Licensee, shall not constitute a breach of this Agreement, and Licensee will not be liable to Broker. 13. RIGHT TO USE THE PROGRAMS. The right to use the Programs produced by Broker and to authorize their use in any manner and in any media whatsoever shall be and remain vested in Broker. 14. PAYOLA. Broker agrees that neither it nor any of its employees or agents will accept any compensation or any kind of gift or gratuity of any kind whatsoever, regardless of its value or form, including, but not limited to, a commission, discount, bonus, materials, supplies or other merchandise, services or labor, whether or not 9 pursuant to written contracts or agreements between them and merchants or advertisers, unless, to the extent required by the FCC, the payer is identified in the program as having paid for or furnished such consideration. Broker agrees annually, or more frequently upon the request of Licensee, to provide Licensee with Payola Affidavits substantially in the form attached hereto as ATTACHMENT IV. 15. COMPLIANCE WITH LAW. Broker agrees that, throughout the term of this Agreement, Broker will materially comply with all laws and regulations applicable in the conduct of Licensee's business, and Broker acknowledges that Licensee has not urged, counseled or advised the use of any unfair business practice. 16. POLITICAL ADVERTISING. Broker shall cooperate with Licensee as Licensee complies with the political broadcasting requirements of the Federal Communications Act of 1934, as amended (the "Act") and the FCC's rules and policies thereunder. Broker shall supply such information promptly to Licensee as may be necessary to comply with the lowest unit charge requirements of Section 315 of the Act. To the extent that Licensee believes necessary, in Licensee's sole discretion, Broker shall release advertising availabilities to Licensee to permit it to comply with its reasonable access provisions of Section 312(a)(7) of the Act, the equal opportunities provision of Section 315 of the Act, and the rules and policies of the FCC thereunder; PROVIDED, HOWEVER, that all revenues realized by Licensee as a result of such a release of advertising time shall promptly be remitted to Broker. In any event, with respect to the Stations, Licensee must oversee and take ultimate responsibility with respect to the provision of equal opportunities, lowest unit charge, and reasonable access to political candidates, and compliance with the political broadcast rules and policies of the FCC. 10 17. INDEMNIFICATION; WARRANTY. Broker will indemnify and hold Licensee harmless against all liability for its material breach of representations, warranties or covenants as well as for libel, slander, illegal competition or trade practice, infringement of trademarks, trade names or program titles, violation of rights of privacy, and infringement of copyrights and proprietary rights resulting from the broadcast of Programs furnished by Broker. Further, Broker warrants that the broadcasting of the Programs will not violate any rights of others, and Broker agrees to hold Licensee harmless from any and all claims, damages, liability, costs and expenses, including reasonable attorneys' fees, arising from the broadcasting of the Programs. Licensee reserves the right to refuse to broadcast any Programs containing matter which is or, in the reasonable opinion of Licensee, may be, or which a third-party claims to be, violative of any right of Licensee or which may constitute a personal attack as the term is and has been defined by the FCC. Broker's obligation to hold Licensee harmless against the liabilities specified above shall survive any termination of this Agreement until the expiration of all applicable statutes of limitation. Reciprocally, Licensee shall indemnify and hold Broker harmless against all liability for its material breach of representations, warranties or covenants as well as for libel, slander, illegal competition or trade practices, infringement or trademarks, trade names or program titles, violations of rights of privacy and infringement of copyrights and proprietary rights resulting from programming furnished by Licensee. Further, Licensee warrants that the broadcasting of the Programs will not violate any rights of others, and Licensee agrees to hold Broker harmless for any loss, damage or injury or any kind (including reasonable legal fees and related costs) arising from the broadcast of programming on the Stations furnished 11 by Licensee. Licensee's obligation to hold Broker harmless against the liabilities specified above shall survive any termination of this Agreement until the expiration of the applicable statute of limitations. 18. EVENTS OF DEFAULT; CURE PERIODS AND REMEDIES. 18.1 EVENTS OF DEFAULT. The following shall, after the expiration of the applicable cure periods, constitute Events of Default under the Agreement: 18.1.1 NON-PAYMENT. Broker's failure to timely pay the consideration provided for in Paragraph 2 hereof; or 18.1.2 DEFAULT IN COVENANTS OR ADVERSE LEGAL ACTION. The default by either party hereto in the material observance or performance of any material covenant, condition or agreement contained herein or either party shall: (a) make a general assignment for the benefit of creditors, or (b) files or has filed against it a petition for bankruptcy, for reorganization or for the appointment of a receiver, trustee or similar creditors' representative for the property or assets of such party under any federal or state insolvency law, which, if filed against such party, has not been dismissed or discharged within sixty (60) days thereof; or 18.1.3 BREACH OF REPRESENTATION. If any material representation or warranty herein made by either party hereto or in any certificate or document furnished by either party to the other pursuant to the provisions hereof shall prove to have been false or misleading in any material respect as of the time made or furnished; or 18.1.4 SUBSTITUTION OF PROGRAMMING. If, other than the hours described in Section 5.1(i) hereof, Licensee preempts or substitutes other programming 12 for that supplied by Broker during five and one-half (5.5%) percent or more of the total hours of operation of each of the Stations during any calendar month. 18.2 CURE PERIODS. An Event of Default shall not be deemed to have occurred until thirty (30) business days after the non-defaulting party has provided the defaulting party with written notice specifying the event or events that, if not cured, would constitute an Event of Default and specifying the actions necessary to cure within such period. This period may be extended for a reasonable period of time if the defaulting party is acting in good faith to cure and such delay is not materially adverse to the other party. 18.3 TERMINATION UPON DEFAULT. In the event of the occurrence of an Event of Default pursuant to this Agreement, the non-defaulting party may terminate this Agreement after any relevant cure period provided herein or therein if that party is not also in material default pursuant to this Agreement. If Licensee terminates this Agreement because Broker has defaulted in the performance of its obligations under this Agreement, Licensee shall be under no further obligation to make available to Broker any further broadcast time or broadcast transmission facilities and all amounts accrued or payable to Licensee up to the date of termination which have not been paid, less any payments made on behalf of Licensee by Broker and any payment credits, shall immediately become due and payable. 18.4 LIABILITIES UPON TERMINATION. Broker shall be responsible for all liabilities, debts and obligations of Broker accrued from the purchase of air time and use of transmission facilities, including, without limitation, Broker's accounts payable, barter agreements and unaired advertisements, but not for Licensee's federal, state and local 13 tax liabilities associated with Broker's payments to Licensee as provided herein. With respect to Broker's obligations for consideration in the form of air time, Broker may propose compensation to Licensee for meeting these obligations, but Licensee shall be under no duty to accept such compensation or to perform such obligations. 19. TERMINATION UPON ORDER OF GOVERNMENTAL AUTHORITY. The parties intend that this Agreement shall comply with all applicable federal, state and local regulations. In the event that a federal, state or local governmental authority designates a hearing with respect to the continuation or renewal of any licenses, permits or authorizations held by Licensee for the operation of each of the Stations or orders the termination of this Agreement and/or the curtailment in any manner material to the relationship between the parties hereto of the provision of programming by Broker hereunder, Broker, at its option, may seek administrative or judicial appeal of, or relief from, such order(s) (in which event Licensee shall cooperate with Broker provided that Broker shall be responsible for legal fees incurred in such proceedings) or Broker shall notify Licensee that it will terminate this Agreement in accordance with such order(s). If the FCC designates any renewal application of the Stations for a hearing or commences a hearing to consider revocation of any license or permit for the Stations as a consequence of this Agreement or for any reason other than the fault of Broker, Licensee shall be responsible for expenses incurred as a consequence of the FCC proceeding; PROVIDED, HOWEVER, that Broker shall cooperate and comply with any reasonable request of Licensee to assemble and provide to the FCC information relating to Broker's performance under this Agreement. In the event of termination upon such governmental order(s), Broker shall pay to Licensee any fees due but unpaid 14 as of the date of termination unless prohibited by such order(s), and Licensee shall reasonably cooperate with Broker to the extent permitted to enable Broker to fulfill advertising or other programming contracts then outstanding, in which event Licensee shall receive as compensation for such advertising or programming that which otherwise would have been paid to Broker thereunder. Thereafter, neither party shall have any liability to the other under the Agreement except as may be provided pursuant to Paragraph 16 hereof. 20. REPRESENTATIONS AND WARRANTIES. 20.1 MUTUAL REPRESENTATIONS AND WARRANTIES. Licensee and Broker represent that they are legally qualified, empowered and able to enter into this Agreement, and that the execution, delivery and performance hereof shall not constitute a breach or violation of any agreement, contract or undertaking to which any party is subject or by which it is bound. Licensee and Broker warrant, represent, covenant and certify that Licensee maintains, and shall continue to maintain, ultimate control over each of the Stations' facilities during the term of this Agreement, including, without limitation, control over each of the Stations' finances, personnel and programming. Licensee and Broker represent and warrant that they have taken all necessary corporate and other action to make this Agreement legally binding on such party, and that the individuals signing this Agreement on their behalf have been fully authorized and empowered to execute this Agreement. 20.2 LICENSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS. Licensee makes the following further representations, warranties and covenants: 15 1. AUTHORIZATIONS. Licensee holds and owns all licenses and other permits and authorizations necessary for the operation of each of the Stations as presently conducted (including licenses, permits and authorizations issued by the FCC), and such licenses, permits and authorizations will be in full force and effect for the entire term hereof, unimpaired by any acts or omissions of Licensee or of any of their principals, employees, or agents. 2. LITIGATION. Except as set forth in Schedule 20.2(2) of this Agreement, there is not now pending or, to the knowledge of Licensee, threatened, any action by the FCC or any other party to revoke, cancel, suspend, refuse to renew or modify adversely, any of the licenses, permits or authorizations necessary to the operation of each of the Stations (other than proceedings of general applicability to the radio broadcast industry). Licensee has no reason to believe that any such license, permit or authorization will not be renewed in its ordinary course. 20.3 BROKER'S REPRESENTATIONS, WARRANTIES AND Covenants. The Broker hereby verifies that the arrangement contemplated by this Agreement complies with the ownership limitations set forth in the Telecommunications Act of 1996, as adopted February 8, 1996. 21. FCC COMPLIANCE. Notwithstanding anything herein contained to the contrary, this Agreement, any related agreements and the parties' performance hereunder and thereunder (i) do not and will not constitute, create, or have the effect of constituting or creating, directly or indirectly, actual or practical ownership of Licensee or any of the Stations by Broker or control, affirmative or negative, direct or indirect, by the Broker over the programming, management, or any other aspect of the operation of 16 the Licensee or any of the Stations, which ownership and control will remain exclusively and at all times in the Licensee; and (ii) do not and will not constitute the transfer, assignment, or disposition in any manner, voluntarily or involuntarily, directly or indirectly, of any license or permit at any time issued by the FCC to the Licensee or the transfer of control of the Licensee within the meaning of Section 310(d) of the Act, without the FCC's necessary prior written consent having been obtained. 22. MODIFICATION AND WAIVER. No modification or waiver of any provision of this Agreement shall in any event be effected unless the same shall be in writing and signed by the party adversely affected by the waiver or modification, and then such waiver and consent shall be effective only in the specific instance and for the purpose for which given. 23. NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of Licensee or Broker in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of Licensee and Broker herein provided are cumulative and are not exclusive of any right or remedies which they may otherwise have. 24. CONSTRUCTION. This Agreement shall be construed in accordance with the laws of the State of New Jersey, and the obligations of the parties hereto are subject to all federal, state or municipal laws or regulations now or hereafter in force and to the regulations of the FCC and all other governmental bodies or authorities presently or hereafter to be constituted. 17 25. HEADINGS. The headings contained in this Agreement are included for convenience only and no such heading shall in any way alter the meaning of any provision. 26. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including, without limitation, any assignee of the Licensee for the FCC licenses for the Stations. Licensee and Broker shall not be permitted to assign this Agreement without obtaining the consent of the other party, which consent may be withheld for any reason whatsoever. 27. COUNTERPART SIGNATURES. This Agreement may be signed in one or more counterparts, each of which shall be deemed a duplicate original, binding on the parties hereto notwithstanding that the parties are not signatory to the original or the same counterpart. 28. NOTICES. Any notice required hereunder shall be in writing and any payment, notice or other communications shall be deemed given when delivered personally or mailed by certified mail or Federal Express, postage prepaid, with return receipt requested, and addressed in accordance with the listing set forth in ATTACHMENT V hereto. If mailed, notice shall be deemed given three (3) days after it is mailed. 29. ENTIRE AGREEMENT. This Agreement, which includes the attached Exhibits and Schedules and the Option Agreement, embodies the entire agreement between the parties and there are no other agreements, representations, warranties or understandings, oral or written, between them with respect to the subject matter hereof. 18 No alterations, modification or change of this Agreement shall be valid unless by like written instrument. 30. NO PARTNERSHIP OR JOINT VENTURE CREATED. Nothing in this Agreement shall be construed to make Licensee and Broker partners or joint venturers of the other. None of the parties hereto shall have the right to bind the others to transact any business in the other's name or on its behalf, in any form or manner or to make any promises or representations on behalf of the other, except as expressly provided for herein. 31. SEVERABILITY. In the event that any of the provisions contained in this Agreement are held to be invalid, illegal or unenforceable it shall not affect any other provision hereof and this Agreement shall be construed as if such invalid, illegal or unenforceable provisions had not been contained herein. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. PORT JERVIS BROADCASTING CO., INC. By: /s/ Robert I. Wein --------------------------------------------- Robert I. Wein, President NASSAU BROADCASTING PARTNERS, L.P. By: Nassau Broadcasting Holdings, Inc., its General Partner By: /s/ Louis F. Mercatanti, Jr. --------------------------------------------- Louis F. Mercatanti, Jr., President 19 TIME BROKERAGE AGREEMENT ATTACHMENT I Broker will broadcast an adult contemporary entertainment format which may include news as well as promotions (including on-air giveaways) and contests. Programming provided by Broker may include commercial matter, including that in both program or spot announcement forms, as well as entertainment and public service programming. 21 TIME BROKERAGE AGREEMENT ATTACHMENT LL INTENTIONALLY BLANK 22 TIME BROKERAGE AGREEMENT ATTACHMENT III Broker agrees to cooperate with Licensee in the broadcasting of Programs of the highest possible standard of excellence and for this purpose to observe the following regulations in the preparation, writing and broadcasting of its Programs: I. RESPECTFUL OF FAITHS. The subject of religion and references to particular faiths, tenets and customs shall be treated with respect at all times. II. NO DENOMINATIONAL ATTACKS. Programs shall not be used as a medium for attack on any faith, denomination or sect or upon any individual or organization. III. CONTROVERSIAL ISSUES. Any discussion of controversial issues of public importance shall be reasonably balanced with the presentation of contrasting viewpoints in the course of overall programming; no attacks on the honesty, integrity or like personal qualities of any person or group of persons shall be made during the discussion of controversial issues of public importance; and during the course of political campaigns, Programs are not to be used as a forum for editorializing about individual candidates. If such events occur, Licensee may require that responsive programming be aired. IV. DONATION SOLICITATION. Requests for donations in the form of a specific amount, for example, $1.00 to $5.00, shall not be made if there is any suggestion that such donation will result in miracles, cures or prosperity. However, statements generally requesting donations to support the broadcast or church may be permitted. V. NO MINISTERIAL SOLICITATIONS. No invitations by a minister or other individual appearing on the program to have listeners come and visit him or her for consultation or the like shall be made if such invitation implies that the listeners will receive consideration, monetary gain or cures for illness. 23 VI. NO VENDING OF MIRACLES. Any exhortation to listeners to bring money to a church affair or service is prohibited if the exhortation, affair or service contains any suggestion that miracles, cures or prosperity will result. VII. SALE OF RELIGIOUS ARTIFACTS. The offering for sale of religious artifacts or other items for which listeners would send money is prohibited unless such items are readily available in ordinary commerce or are clearly being sold for legitimate fundraising purposes. VIII. NO MIRACLE SOLICITATION. Any invitations to listeners to meet at places other than the church and/or to attend other than regular services of the church is prohibited if the invitation, meeting or service contains any claim that miracles, cures or prosperity will result. IX. NO CLAIMS OF UNDOCUMENTED MIRACLES. Any claims of miracles or cures not documented in biblical scripture and quoted in context are prohibited; E.G., this prohibits a minister and/or other individual appearing on the program from personally claiming any cures or miracles and also prohibits the presentation of any testimonials regarding such claims, either in person or in writing. X. NO PLUGOLA OR PAYOLA. The mention of any business activity or "plug" for any commercial, professional or other related endeavor, except where contained in an actual commercial message of a sponsor, is prohibited. XI. NO LOTTERIES. Announcements giving any information about lotteries or games prohibited by federal or state law or regulation are prohibited. 24 XII. NO "DREAM BOOKS". References to "dream books", the "straight line" or other direct or indirect descriptions or solicitations relative to the "numbers game" or the "policy game" or any other form of gambling are prohibited. XIII. NO NUMBERS GAMES. References to chapter and verse numbers, paragraph numbers or song numbers which involve three (3) digits should be avoided and, when used, must relate to the overall theme of the program. XIV. ELECTION PROCEDURES. At least ninety (90) days before the start of any primary or regular election campaign, Broker will clear with Licensee's General Manager the rate Broker will charge for the time to be sold to candidates for public office and/or their supporters to make certain that the rate charged conforms to all applicable laws and Station policy. XV. SPOT COMMERCIAL LIMITATIONS. With respect to any given segment of air time hereunder, the amount of spot commercial matter shall not exceed twenty (20) minutes during any sixty (60) minute segment. Broker will provide, for attachment to each of the Stations' logs, a list of all commercial announcements carried during its programming, XVI. REQUIRED ANNOUNCEMENTS. Broker shall broadcast (i) an announcement in a form satisfactory to Licensee at the beginning of each hour to identify Station call letters, (ii) an announcement at the beginning and end of each program and hourly, as appropriate, to indicate that program time has been purchased by Broker; and (iii) any other announcement that may be required by law, regulation or Station policy. 25 XVII. CREDIT TERMS ADVERTISING. Pursuant to rules of the Federal Trade Commission, no advertising of credit terms shall be made over the Station beyond mention of the fact that, if desired, credit terms are available. XVIII. COMMERCIAL RECORDKEEPING. Broker shall not receive any consideration in violation of the FCC's sponsorship identification rule and the anti-payola provisions of the Act. No commercial messages ("plugs") or undue references shall be made in programming presented over each of the Stations to any business venture, profit-making activity, or other interest (other than non-commercial announcements for BONA FIDE charities, church activities or other public service activities) in which Broker (or anyone else) is directly or indirectly interested without the same having been approved in advance by Licensee's General Manager and such broadcast being announced and logged and sponsored. XIX. NO ILLEGAL ANNOUNCEMENTS. No announcements or promotion prohibited by federal or state law or regulation of any lottery or game shall be made over each of the Stations. Any game, contest or promotion relating to or to be presented over the Stations must be fully stated and explained in advance to Licensee which reserves the right, in its sole discretion, to reject any game, contest or promotion. XX. PROGRAMMING PROHIBITIONS. Broker shall not knowingly broadcast any of the following Programs or announcements: A. FALSE CLAIMS. False or unwarranted claims for any product or service. 26 B. UNFAIR IMITATION. Infringements of another advertiser's rights through plagiarism or unfair limitation or either program idea or copy, or any other unfair competition. C. COMMERCIAL DISPARAGEMENT. Any disparagement of competitors or competitive goods. D. PROFANITY. Any Programs or announcements that are slanderous, obscene, profane, vulgar, repulsive or offensive, either in them or treatment. E. PRICE DISCLOSURE. Any price mentions except as permitted by Licensee's policies current at the time. F. DESCRIPTIONS OF BODILY FUNCTIONS. Any programming which describes in a repellent manner internal bodily functions or symptomatic results or internal disturbances. G. UNAUTHENTICATED TESTIMONIALS. Any testimonials which cannot be authenticated. H. CONFLICT ADVERTISING. Any advertising matter or announcement which may, in the opinion of Licensee, be injurious or prejudicial to the interests of the public, the Stations, or honest advertising and reputable business in general. Licensee, may waive any of the foregoing regulations in specific instances if, in its reasonable opinion, good broadcasting in the public interest will be served thereby. In any case where questions of policy or Interpretation arise, Broker shall submit the same to Licensee for decision before making any commitments in connection therewith. 27 TIME BROKERAGE AGREEMENT ATTACHMENT IV County of State of New Jersey ANTI-PAYOLA/PLUGOLA AFFIDAVIT Louis F. Mercatanti, Jr., being first duly sworn, deposes and says as follows: 1. He is the President of the General Partner for NASSAU BROADCASTING PARTNERS, L.P. ("BROKER"). 2. He has acted in the above capacity since (DATE). 3. No matter has been provided for broadcast by Stations WDLC-AM and WSTX-FM (hereinafter collectively referred to as the "Stations"), for which service, money or other valuable consideration has been directly or indirectly paid, or promised to, or charged, or accepted, by him from any person, which matter at the time so broadcast has not been announced or otherwise indicated as paid for or furnished by such person. 4. So far as he is aware, no matter has been provided for broadcast by the Stations for which service, money or other valuable consideration has been directly or indirectly paid, or promised to, or charged, or accepted by the Stations by the Broker, or by any independent contractor engaged by the Broker in furnishing Programs, from any person, which matter at the time so broadcast has not been announced or otherwise indicated as paid for or furnished by such person. 28 5. In the future, he will not pay, promise to pay, request or receive any service, money or any other valuable consideration, direct or indirect, from a third-party in exchange for the influencing of, or the attempt to influence, the preparation or presentation of broadcast matter on the Stations. 6. Except as may be reflected in Paragraph 7 hereof, neither he, his spouse nor any member of his immediate family, has any present, direct or indirect, ownership interest in any entity engaged in the following business or activities (other than an investment in a corporation whose stock is publicly held), serves as an officer or director of, whether with or without compensation, or serves as an employee of, any entity engaged in the following business or activities: a. the publishing of music; b. the production, distribution (including wholesale and retail sales outlets), manufacture or exploitation of music, films, tapes, recordings or electrical transcriptions of any program material intended for radio broadcast use; c. the exploitation, promotion or management of persons rendering artistic, production and/or other services in the entertainment field; d. the ownership or operation of one or more radio or television stations; e. the wholesale or retail sale of records intended for public purchase; and f. the sale of advertising time other than on the Stations or any other station owned by the Broker. 29 7. A full disclosure of any such interest referred to in Paragraph 6 above is as follows: - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- --------------------------------------- Affiant Subscribed and sworn to before me this day of , 1998 --- ---------- - ---------------------------------- Notary Public My commission expires: ------------ 30 TIME BROKERAGE AGREEMENT ATTACHMENT V If the notice is to Licensee: Port Jervis Broadcasting Co., Inc. P.O. Box 290 Port Jervis, NY 12771 ATTENTION: Robert I. Wein with a copy to: Cuddeback & Onofry 17 East Main Street Port Jervis, NY 12771 ATTENTION: Robert A. Onofry, Esq. If the notice is to Broker: Nassau Broadcasting Partners, L.P. 600 Alexander Road Princeton, New Jersey 08540 ATTENTION: Louis F. Mercatanti, Jr. with a copy to: Sterns & Weinroth A Professional Corporation 50 West State Street, Suite 1400 P.O. Box 1298 Trenton, New Jersey 08607-1298 ATTENTION: Mark D. Schorr 31 EX-10.6 21 0021.txt TIME BROKERAGE AGMT, DTD 2/12/1997 Exhibit 10.6 TIME BROKERAGE AGREEMENT TIME BROKERAGE AGREEMENT ("Agreement"), made and entered into this 12th day of February 1997, by and among Manahawkin Communications Corporation ("Licensee"), the permittee of the FM radio station on 105.7 MHz, Manahawkin, New Jersey, Jersey Devil Broadcasting, Inc., Southern Ocean Broadcasting, Inc. ("Southern Ocean") and Great American Communications Co. (collectively the "Licensee Shareholder Corporations"), and Nassau Broadcasting Partners, L.P. ("Broker"). WHEREAS, Licensee will have available broadcasting time and will be engaged in the business of radio broadcasting on the FM radio station on 105.7 MHz, Manahawkin, New Jersey (hereinafter, the assets including all property of every kind used in conjunction with FM station on 105.7 MHz and the licenses and associated authorizations for FM radio station on 105.7 MHz, Manahawkin, New Jersey presently held or hereafter acquired by Licensee, referred to as the "Station"); WHEREAS, Broker desires to use Station's broadcasting time for the presentation of programming, including the sale of advertising time; WHEREAS, Licensee Shareholder Corporations are owners of all of the issued and outstanding shares of the capital stock of Licensee (the "Shares"); and WHEREAS, in consideration of the obligations incurred by the Broker in entering into and performing this Agreement, Licensee and Licensee Shareholder Corporations are granting an option to purchase the Shares. - 1 - NOW, THEREFORE, for and in consideration of the mutual covenants herein contained, the parties hereto have agreed and do agree as follows: 1. FACILITIES. Commencing on the Effective Date as described in Section 3, Licensee agrees to make its broadcasting transmission facilities available to Broker and to broadcast on the Station, or cause to be broadcast on the Station, Broker's programs which will originate from Broker's own facilities. A description of Broker's programs is contained in Attachment I hereto. 2. PAYMENTS. Commencing on the Effective Date as described in Section 3, Broker agrees to pay Licensee for the broadcast of the programs hereunder during the Term the sum of FIFTEEN THOUSAND DOLLARS ($15,000) per month for the first twelve (12) months of the Term, and EIGHTEEN THOUSAND SEVEN HUNDRED FIFTY DOLLARS ($18,750.00) for the next twelve months, and Twenty-Three Thousand Four Hundred Thirty-Seven Dollars and Fifty Cents ($23,437.50) per month thereafter until the termination, including any extensions, of this Agreement, due and payable in advance on the first day of each month (the "LMA Payment"). Payment for the first month of this Agreement will be prorated if the effective date of this Agreement is not the first day of the month. In addition, the Broker will additionally pay to the Licensee its verifiable legitimate expenses incurred in the operation of the Station as described in Attachment II, with such expense payments to be remitted to Licensee by Broker within fifteen (15) days of Licensee's providing to Broker invoices or evidence of such expenses. The LMA Payment shall be applied as follows: 70% of this amount will constitute payment for programs broadcast during the hours of 5:00 a.m. to 9:00 a.m. and 3:00 - 2 - p.m. to 7:00 p.m. Monday through Friday; 25% of this amount will constitute payment for programs broadcast between 10:00 a.m. and 3:00 p.m. Monday through Friday and 7:00 a.m. to 7:00 p.m. Saturday and Sunday; and the remaining 5% for all other hours, with any credit to Broker to be determined on this basis. The Broker shall receive a payment credit for any programming provided by it to the Station and not broadcast by Station for whatever reason except for time utilized by Licensee under Section 6(i) and Section 6(ii), such credit to be determined each month by multiplying the monthly payment and reimbursements due by the ratio of the amount of time preempted or not accepted to the total number of broadcast hours produced by Broker in accordance with the percentages above with regard to the time period that the programming did not run. Each separate block of Broker's programming preempted or not accepted by Licensee that is of a length of less than eight (8) hours in duration shall be for the purposes of this computation be regarded as eight (8) hours in duration, such time that is the difference between the actual time and eight (8) hours to extend in equal lengths before and after the actual time preempted for the purpose of this computation. Where practicable, the Licensee shall give Broker advance notice of an intention to preempt Broker's programming. Broker shall promptly reimburse (and in no event later than 30 days) Licensee for payments by Licensee for programming with respect to ASCAP, BMI, SESAC, and any other copyright holders for Broker's programming broadcast on the Station. 3. EFFECTIVE DATE. The effective date of the time brokerage provisions of Agreement shall be the date upon which program test authority for Station commences, pursuant to Section 73.1260 of the Federal Communications Commission ("Commission") Rules, 47 C.F.R.ss. 73.1260, or successor rule ("Effective Date"). Prior to the Effective Date, this Agreement - 3 - nonetheless represents the legal and binding obligations of the Licensee and Broker. 4. TERM. This Agreement will be in effect between the parties for a term that ends: on the date three (3) years after the Effective Date described in Section 3 above; or, in the event the Option is exercised by the Broker, upon a closing of any such transaction or termination as otherwise provided under this Agreement ( "Term"), provided, however, that if the Broker has failed to exercise the Option by the end of the Option Term, as defined in Section 18.1, either Licensee or Broker shall have the right to terminate this Agreement without penalty to the party giving notice upon its giving 120-days' written notice to the other party. 5. PROGRAMS TO BE CARRIED. Broker shall furnish or cause to be furnished the artistic personnel and material for the programs to be provided under this Agreement and all programs shall be in good taste and in accordance with Federal Communications Commission ("Commission") requirements. All programs shall be prepared and presented in conformity with the regulations prescribed in Attachment III hereto. All advertising spots and promotional material announcements shall comply with all applicable Federal, State and Local regulations and policies. If, in the sole judgment of the Licensee or the station's General Manager, the Broker does not comply with said standards, the Licensee may suspend or cancel any program not in compliance. In offering the commercial inventory of Station for sale to third parties and in otherwise holding itself out to third parties, in no instance will the Broker represent, suggest or otherwise give the impression that Broker has any ownership of, control over or connection with the operation of Station. Broker will affirmatively state to third parties in the sale of the Station's commercial inventory that Broker is acting as a time broker of Station's commercial - 4 - inventory and programming only and that except for such role as a time broker, Broker has no other connection with or control over Station's programming, finances or operations. 6. STATION FACILITIES. Between the date of this Agreement and the Effective Date, Licensee will expeditiously and without delay construct the Station facilities so as to be able to commence broadcasting with the facilities authorized by the Commission. Thereafter, the Licensee will, at all times, operate the Station in accordance with the authorizations issued to it by the Commission. Commencing on the Effective Date and throughout the term of this Agreement, Licensee shall make the Station time available to the Broker for operation with the maximum authorized facilities twenty-four hours a day, seven days a week, except for: (i) downtime occasioned by routine maintenance not to exceed two hours each Sunday morning between the hours of 12 Midnight and 6:00 a.m.; (ii) up to three hours Sunday morning, during which time Licensee shall produce, at its own expense, public service programming designed to address the problems, needs, and issues relevant to the residents throughout the Station's listening area; and (iii) times which Broker's programs are not accepted or preempted by Licensee. Any maintenance work affecting the operation of the Station at full power shall be scheduled upon at least forty-eight hours prior notice with the agreement of the Broker, such agreement not to be unreasonably withheld. If the Station suffers loss or damage of any nature to its transmission facilities which results in the interruption of service or the inability of the Station to operate with its maximum authorized facilities, Licensee shall immediately notify Broker, and Licensee shall undertake such repairs as may be necessary to restore full-time operation of the Station with its maximum authorized facilities within seven days from the occurrence of such loss or damage. If such repairs are not made within seven (7) days, Broker - 5 - may give Licensee twenty (20) days' notice of termination of this Agreement, and the Agreement shall terminate twenty days after such notice if the repairs are not made within the twenty-day period, and Broker shall have no further responsibility to make any payments pursuant to Section 2 of this Agreement, provided, however, that the Option in Section 18.1 shall survive for the Term. 7. HANDLING OF MAIL. Except as required to comply with Commission rules and policies, including those regarding the maintenance of the public inspection file (which shall at all times be the responsibility of Licensee), Licensee shall not required to receive or handle mail, cables, telegraph or telephone calls in connection with programs supplied by Broker hereunder unless Licensee, at the request of Broker, has agreed in writing to do so. 8. STATION EQUIPMENT, PERSONNEL AND EXPENSES 8.1. Licensee's Equipment. The equipment and fixtures at the Station, its transmitter site and any related studio equipment shall be and remain the sole property of the Licensee. Licensee shall be responsible for the maintenance of the Licensee's transmitter, tower, antenna and any related equipment, with such costs to be reimbursed by the Broker within fifteen (15) days after presentation of evidence of payment by Licensee of such costs. Prior to expending any funds for which the Licensee expects Broker reimbursement, the Licensee shall seek the consent of the Broker for such expenditure, and such consent shall not be unreasonably withheld. Notwithstanding the foregoing, nothing in this Section shall be interpreted to restrict or inhibit the Licensee from making repairs, changes and improvements to the Station for which the Licensee does not seek reimbursement. - 6 - 8.2. Responsibility for Employees and Expenses. Broker shall employ and be responsible for the salaries, taxes, insurance and related costs for all personnel and equipment used in the production of its programming and the transmission of its programming to the Station (including salespeople, traffic personnel, board operators, programming and satellite programming source installation staff). Licensee will provide and be responsible for the Station personnel necessary for the broadcast transmission of Broker's programs (including, without limitation, the selection and salaries of Station General Manager, Chief Operator, and any other necessary employees), and will be responsible for the salaries, taxes, insurance, and related costs for all the Station personnel used in the broadcast transmission of Broker's programs, as well as all equipment at the site where the Station's tower and transmitter are located. Whenever on the Station's premises, all personnel shall be subject to the supervision and the direction of the Licensee's General Manager and/or Chief Operator. Licensee shall pay all license fees for programming in respect to ASCAP, BMI, SESAC, and any other copyright holders for programming broadcast by Broker on the Station, which payments shall be promptly (and in no event later than 30 days) reimbursed by Broker upon notice of payment. Licensee will not spend or cause to be spent any funds not covered under this Agreement for which reimbursement is sought without the written consent of Broker. 9. ADVERTISING REVENUES. Broker shall retain all revenues derived from the sale of local, regional and national advertising time on the programs it delivers to the Station, and also any programming delivered directly to the Station by satellite facilities, and may sell such advertising in combination with the sale of advertising on any other broadcasting station of its choosing. Other than the brokered time sold to Broker under this Agreement, Licensee shall not - 7 - sell any advertising or other time in exchange for cash, services or merchandise, except for political time that may be required by law to be sold by the Licensee in which case the Licensee shall promptly remit any such revenues obtained from the sale of such time to the Broker. 10. OPERATION OF STATION. Notwithstanding anything to the contrary in this Agreement, Licensee shall have full authority and power over the operation of the Station during the Term. Licensee's General Manager for the Station shall report solely to and be accountable solely to the Licensee, and shall direct the day-to-day operation of the Station. Licensee shall have complete control over the policies, programming and operations of the Station, including, without limitation, the right to decide whether to accept or reject any programming or advertisements and the right to preempt any programs in order to broadcast programs deemed by Licensee to be of greater national, regional, or local interest. Licensee shall retain the right to take any other actions necessary for compliance with the laws of the United States of America; the State of New Jersey; the rules, regulations, and policies of the Commission; and the rules, regulations and policies of other federal governmental authorities, including the Federal Trade Commission and the Department of Justice. Licensee shall at all times, be solely responsible for meeting all of the Commission's requirements with respect to emergency broadcast system tests, public service programming, and for maintaining the Station's political and public inspection files and for the preparation of Issues/Programs Lists. Broker shall maintain daily program logs as long as any applicable law should at any time direct and all program logs, or copies, shall be available for inspection or reproduction by Licensee. Licensee shall prepare and place in the public file, the quarterly Issues/Programs Lists. Licensee shall be ultimately responsible for all requests for political time from political candidates, and Broker - 8 - shall coordinate with Licensee all such sales of political time in accord with Commission rules and regulations. Broker shall, upon request by Licensee, provide Licensee with information with respect to such of Broker's programs which are responsive to public needs and interests to assist Licensee in the preparation of required programming reports, and will provide upon request other information to enable Licensee to prepare other records, reports and logs required by the Commission or other local, state or federal governmental agencies. 11. LICENSEE'S UNFETTERED RIGHT OF PREEMPTION. The Licensee specifically reserves the right, in its sole discretion, to preempt, delete or not broadcast as the case may be any of the Broker's programs which the Licensee regards as being unsuitable for broadcast or the broadcast of which it believes would be contrary to the public interest. In all such cases, the Licensee will use its best efforts to give Broker reasonable notice of its intention to preempt such programs and, in the event of such preemption, Broker shall receive a payment credit for the programs so omitted in accord with Section 2. In no event shall any preemption, deletion or failure to broadcast Broker's programs take place for the commercial or economic advantage of the Licensee. 12. FORCE MAJEURE. Any failure or impairment of the Station facilities or any delay or interruption in broadcasting programs, or the failure at any time to furnish facilities, in whole or in part, for broadcasting, due to acts of God, strikes, or threats thereof, force majeure, or to causes beyond the control of the Licensee, shall not constitute a breach of this Agreement. 13. RIGHT TO USE THE PROGRAMS. The right to use the programs produced by the - 9 - Broker and to authorize their use in any manner and in any media whatsoever shall be, and remain, vested in Broker. 14. PAYOLA. Broker agrees that it will not accept any compensation or gratuity of any kind whatsoever, regardless of its value or form, including, but not limited to, a commission, discount, bonus, materials, supplies, or other merchandise, services or labor, whether or not pursuant to written contracts or agreements between Broker and merchants or advertisers, unless the payer is identified in the program as having paid for or furnished such consideration in accordance with FCC requirements. 15. COMPLIANCE WITH LAW. Broker and Licensee agree that, throughout the term of this Agreement, each will comply with all laws and regulations applicable in the conduct of its respective business. - 10 - 16. EVENTS OF DEFAULT; CURE PERIODS AND REMEDIES. 16.1. Events of Default. The following shall, after the expiration of the applicable cure periods, constitute Events of Default under this Agreement: 16.1.1 Non-Payment. Broker's failure to make the LMA Payments, provided that if Broker fails to make the LMA Payment more than three (3) times, Broker will no longer be entitled to the benefit of the cure provisions of Section 16.2 hereof and its failure to make a timely LMA Payment thereafter shall be considered an Event of Default. Failure to tender the LMA Payment by the tenth (10th) day of the month will be treated as a late payment for the purposes of this Agreement and determination of non-payment under this Section; 16.1.2. Default in Covenants or Adverse Legal Action. The default by either party hereto in the material observance or performance of any material covenant, condition or agreement contained herein, or if either party shall (a) make a general assignment for the benefit of creditors, or (b) file or had filed against it a petition for bankruptcy, for reorganization or an arrangement, or for the appointment of a receiver, trustee or similar creditors' representative for the property or assets of such party under any federal or state insolvency law, which, if filed against such party, has not been dismissed or discharged within 60 days thereof; or 16.1.3. Breach of Representation. If any material representation or warranty herein made by either party hereto, or in any certificate or document furnished by - 11 - either party to the other pursuant to the provisions hereof, shall prove to have been false or misleading in any material respect as of the time made or furnished. 16.1.4. Event of Default Under Loan Agreement. Broker and Licensee are parties to a certain Loan and Security Agreement of even date herewith (the "Loan Agreement"). Broker's default under the Loan Agreement will constitute an Event of Default hereunder and terminate the Option provided for in Section 18.1 hereof. 16.2. Cure Periods. An Event of Default shall not be deemed to have occurred until twenty (20) business days after the non-defaulting party has provided the defaulting party with written notice specifying the event or events that if not cured would constitute an Event of Default and specifying the actions necessary to cure within such period. This period may be extended for a reasonable period of time if the defaulting party is acting in good faith to cure and such delay is not materially adverse to the other party. 17. TERMINATION OPTIONS. 17.1. Termination for Licensee Default. In addition to all other legal and equitable remedies Broker may have as a result of an Event of Default by Licensee, Broker may terminate this Agreement. In the event that any of Broker's programming is not run due to such termination, to the extent that such programming of the Broker contains as of the date of termination pre-sold unaired commercial advertisements, whether barter or for cash consideration, the Licensee will have the obligation to either, at its sole discretion, run such announcements during the Licensee's replacement or preempted programming on the same basis - 12 - upon which such advertisements were pre-sold by the Broker, or to compensate Broker in cash for the price of such unaired commercial advertisements. Upon termination, neither party shall have any further liability to the other except as may be provided by this Section or Sections 18, 19.4 or 19.5 hereof. 17.2. Broker's Termination Option. Broker shall have the right, at its option, in addition to all other legal and equitable remedies Broker may have for a default by the Licensee, to terminate this Agreement at any time during the term hereof in the event that Licensee preempts or substitutes other programming for that supplied by the Broker during ten percent or more of the total hours of operation of the Station each day during any three or more days in any given week or during 5.5% or more of the total hours of operation of the Station during any calendar month. In the event Broker elects to terminate this Agreement pursuant to this provision, it shall give Licensee notice of such election at least ten (10) days prior to the termination date. Upon termination, all sums owing to Licensee shall be paid and neither party shall have any further liability to the other except as may be provided by this Section or Sections 18, 19.4 or 19.5 hereof. 17.3. Termination upon Order of Judicial or Governmental Authority. In the event that any court of competent jurisdiction or any federal, state or local governmental authority designates a hearing with respect to the continuation or renewal of any license or authorization held by Licensee for the operation of the Station, advises any party hereto of its intention to investigate or to issue a challenge to or a complaint concerning the activities contemplated by this Agreement, or orders the termination of this Agreement and/or materially - 13 - curtails the provision of programming by Broker hereunder, Licensee shall seek administrative or judicial appeal of or relief from such order(s). If the Commission designates the renewal application of the Station for a hearing as a consequence of this Agreement or for any other reason, Licensee shall be responsible for its expenses incurred as a consequence of the Commission proceeding; provided, however, that Broker shall cooperate and comply with any reasonable request of Licensee to assemble and provide to the Commission information relating to Broker's performance under this Agreement. In the event of termination upon such governmental order(s), Broker shall pay to Licensee any fees due but unpaid as of the date of termination as may be permitted by such order(s), and Licensee shall reasonably cooperate with Broker to the extent permitted to enable Broker to fulfill advertising or other programming contracts then outstanding, in which event Licensee shall receive as compensation for the carriage of such programming that which otherwise would have been paid to Broker thereunder. Thereafter, neither party shall have any liability to the other except as may be provided pursuant to Sections 18, 19.4 or 19.5 hereof. 17.4. Termination for Broker Default. In the event of an occurrence of an Event of Default as described in Section 16.1 with respect to the Broker, Licensee shall be under no further obligation to make available to Broker any further broadcast time or broadcast transmission facilities and all amounts accrued or payable to Licensee up to the date of termination which have not been paid, less any payments made on behalf of Licensee by Broker and any payment credits, shall immediately become due and payable. Broker will also owe Licensee the sum of $15,000.00 per month for the remainder of then current Term of the Agreement, but in any event not to exceed $60,000, to compensate for Licensee's loss of a - 14 - unique business opportunity. Such payments shall constitute liquidated damages to Licensee. This liquidated damages provision of Section 17.4 will not apply in the event of a termination of the Agreement pursuant to Sections 17.1, 17.2 and 17.3 hereof. Thereafter, neither party shall have any liability to the other except as may be provided pursuant to this Section or Sections 18, 19.4 or 19.5 hereof, except that such termination for default by Broker shall also terminate the Option, as defined in 18.1 hereof. 18. SALE OF STATION. As additional consideration for this Agreement: 18.1. Purchase Option. The Licensee grants to Broker, Broker's assignee or designee an option to acquire the stock of Licensee's Shareholder Corporations (the "Option"). The term of the Option shall run from the filing of Licensee's Form 302-FM License application until the date that is one (1) year thereafter, without regard to whether any of the other terms of this Agreement remain in effect (the "Option Term"). The exercise of the Option shall be conditioned only upon Licensee's having filed with the FCC the Station's Form 302-FM license application (or successor application form) certifying the completion of the construction of the Station. The Option shall entitle Broker to purchase the stock of Licensee's Shareholder Corporations for the amount equal to the Fair Market Value, as defined below, of the Station as determined by the average of two appraisals conducted at the time of the exercise of the Option (the "Option Price"). In the event of the exercise of the Option, Licensee and Broker shall each appoint an appraiser. If the value of the appraisals differs by more than twenty percent (20%), the two appraisers shall select a third appraiser, whose appraisal shall be deemed the binding appraisal. For purposes of this Agreement, the term "Fair Market Value" shall be - 15 - defined to mean the price in cash, or its equivalent, at which the Station would change hands between a willing buyer and willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts. In consideration of the grant of the Option, Broker will pay the sum of up to Nine Hundred Thousand Dollars ($900,000.00), such payment to be distributed to the shareholders of the Licensee's Shareholder Corporations as set forth in Schedule A hereto, as a nonrefundable option payment (the "Option Payment") upon the execution of this Agreement. If Broker exercises the Option, which the Parties acknowledge can occur no sooner than the day after Licensee files the Form 302FM license application for the Station, concurrently with the filing of the application to the Commission for consent to transfer of control of the FCC Licenses, as hereinafter defined, Broker will pay Licensee's Shareholder Corporations in immediately available funds a sum equal to 25% of the Option Price (the "Deposit Payment") no later than five (5) business days after written notice to Licensee of the exercise of the Option. In the event that Broker were to exercise the Option, the FCC were to approve a transfer of control of the FCC Licenses, and the parties were to consummate the sale of the stock of the Licensee's Shareholder Corporations, the Option Payment and the Deposit Payment would be credited towards the Option Price. Licensee shall notify Broker at least ten (10) days prior to the date of the commencement of program test authority of the date it intends to commence program test authority. The Option must be exercised in writing in accord with Section 30 of this Agreement. In the event of the exercise of the Option by the Broker, the parties shall execute the Stock Purchase Agreement in the form attached as an Exhibit to this Agreement no later than thirty (30) days after the receipt by Licensee of written notice of Broker's exercise of the Option. Consummation of any such transaction will not occur until - 16 - receipt of all required FCC approvals. This Section 18 survives any termination of this Agreement for whatever cause, unless mutually agreed otherwise. 18.2 The parties expressly acknowledge that this Agreement is specifically subject to the occurrence of conditions set forth in the certain Option Agreement between and among Licensee, Southern Ocean, Jersey Devil, Great American and Nassau Broadcasting Holdings, Inc., an affiliate of Broker, of even date herewith (the "Option Agreement"). Any payments made to the Licensee Shareholder Corporations pursuant to the Option Agreement shall be credited towards the Option Payment hereunder. 18A. REPRESENTATIONS AND WARRANTIES OF LICENSEE SHAREHOLDER CORPORATIONS WITH RESPECT TO THE SHARES. Licensee Shareholder Corporations represent and warrant to Broker that the following statements as to Licensee Shareholder Corporations, Licensee, the Station and the Shares are, where applicable, correct as of the date hereof and that they shall be correct until and at the Closing of the purchase of the Shares by Broker. Broker acknowledges that Joan Beth Hansen, President and sole shareholder of Southern Ocean, has filed for Chapter 11 reorganization under the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey, Trenton Division, Bankruptcy Case 93-33346, and that the representations and warranties of Southern Ocean are subject to such bankruptcy. 18A. 1 As of the date of this Agreement, the Option Payment does not exceed the reasonable and prudent expenditures of the Licensee Shareholder Corporations to prepare, file and prosecute their applications to the Commission for the Station, plus all other - 17 - expenditures of the Licensee and the Licensee Shareholder Corporations towards construction of the Station. 18A.2 They have all requisite power and authority to enter into this Agreement, to transfer the Shares to Broker, and to carry out the transactions contemplated by this Agreement. 18A.3 They are the legal and beneficial owners of all the Shares. 18A.4 There are no further shareholders of the Licensee than the Licensee Shareholder Corporations. 18A.5 The Shares have been duly and validly issued by the Licensee Shareholder Corporations and are owned free and clear of any pledge, mortgage, hypothecation, lien, charge, encumbrance or security interest in such Shares or the proceeds thereof. 18A.6 The execution, delivery and performance of the Option by Licensee and Licensee Shareholder Corporations will not result in any violation of their certificates of incorporation or bylaws, or constitute a default under the terms of any agreement, indenture or other instrument, license, judgment, decree, order, law, statute, ordinance or other governmental rule or regulation applicable to them or any of their property. 18A.7 They will not sell, offer for sale, convey or otherwise dispose of any of the Shares or any interest therein; nor will they create, incur or permit to exist any pledge, mortgage, lien, charge, encumbrance or any security interest whatsoever with respect - 18 - Shares. 18A.8 They will not consent to or approve the issuance of any additional Shares of any class of capital stock; or any securities convertible voluntarily by the holder thereof or automatically upon the occurrence or non-occurrence of any event or commission into, or exchangeable for, any Shares; or any warrants, options, contracts or other commitments entitling any person to purchase or otherwise acquire the Shares. 18A.9 They shall borrow no monies other than the Loan, as that term is defined in the Loan Agreement. 18A.10 They shall have no operations other than construction and operation of the Station. 18A.11 They shall have good title to all business rights, property and assets used or held for use in connection with the business and operation of the Station, and such business rights, property and assets shall not be subject to any contract, sale, encumbrance or other agreement, nor will such business rights, property and assets be sold or offered for sale. 19. REPRESENTATIONS, WARRANTIES, AND INDEMNIFICATION. 19.1. Mutual Representations and Warranties. Licensee, Licensee Shareholder Corporations and Broker each represent to the other that each is legally qualified, empowered, and able to enter into this Agreement, and that the execution, delivery, and performance hereof shall not constitute a breach or violation of any agreement, contract or other obligation to which - 19 - it is subject or by which it is bound. Each further covenants that it will take all necessary corporate action to make this Agreement legally binding on such party by no later than 30 days hereof and that the individuals signing this Agreement will be fully authorized to so sign. 19.2. Licensee's Representations, Warranties and Covenants. Licensee makes the following further representations, warranties and covenants: 19.2.1. Authorizations. Licensee owns and holds or shall own and hold all licenses, permits and authorizations necessary for the operation of the Station (including licenses, permits and authorizations issued by the Commission) (the "FCC Licenses"), and such licenses, permits and authorizations will be in full force and effect for the term of this Agreement, unimpaired by any acts or omissions of Licensee, its employees or agents. There is not now pending or, to Licensee's best knowledge, threatened, any action by the Commission or other party to revoke, cancel, suspend, refuse to renew or modify adversely any of such licenses, permits or authorizations or the imposition of any restriction thereon of such a nature that may limit the operation of the Station. Licensee has no reason to believe that any such license, permit or authorization will not be renewed during the term of this Agreement in its ordinary course. Licensee is not in violation of any statute, ordinance, rule, regulation, order or decree of any federal, state, local or foreign governmental agency, court or authority having jurisdiction over it or over any part of its operations or assets, which default or violation would have an adverse effect on Licensee or its assets or ability to perform this Agreement. 19.2.2. Filings. All reports and applications required to be filed with the Commission (including ownership reports, annual employment reports, and renewal applications) - 20 - or any other governmental agency, department or body in respect of the Station have been, and in the future will be, filed in a timely manner and are and will be true and complete and accurately present the information contained therein. All filing fees associated with the foregoing shall be paid by the Licensee. All such reports and documents, to the extent required to be kept in the public inspection files of the Station, are and will be kept in such files. Upon request by Licensee, Broker shall provide in a timely manner any such information in its possession which will enable Licensee to prepare, file or maintain the records required by the Commission. 19.2.3. Facilities. The Station's facilities will be maintained by the Licensee. The Station facilities will comply and be operated, in all material respects, in accordance with the maximum facilities permitted by the FCC Licenses for the Station and with good engineering standards necessary to deliver a high quality technical signal to the area served by the Station, and within all applicable laws and regulations (including the requirements of the Communications Act and the rules, regulations, policies and procedures of the Commission promulgated thereunder). 19.2.4. Title to Properties. Except as otherwise provided in this Agreement, the Licensee will maintain good and marketable title to all of the assets and properties now used in the operation of the Station, free and clear of any liens, claims or security interests. Licensee will not dispose or, transfer, assign or pledge any material asset, except with the prior written consent of Broker. 19.2.5. Payment of Obligations. Licensee shall pay in a timely fashion all of - 21 - its debts, assessments and obligations, including tax liabilities and payments attributable to the operations of the Station, as they come due from and after the effective date of this Agreement. 19.2.6 Insurance. Licensee will maintain in full force and effect throughout the term of this Agreement insurance with responsible and reputable insurance companies or associations covering such risks, including fire and other risks insured against by extended coverage, public liability insurance, insurance for claims against personal injury or death or property damage and such other insurance as is customarily provided for in radio station operation. Any insurance proceeds received by Licensee in respect of damaged property will be used to repair or replace such property so that the operation of the Station conforms with this Agreement. 19.3. Representations, Warranties and Covenants of Broker. Broker makes the following further representations, warranties and covenants: 19.3.1. Legal Qualifications. Broker is legally qualified under the FCC's local ownership rules, including, but without limitation, Section 73.3555 (or successor rule provision) and applicable FCC policies governing multiple programming of radio stations within the same market. Broker covenants to prepare all necessary documentation for filing with the FCC to demonstrate compliance with Section 73.3555 (or successor rule provision). 19.3.2. Financial Capability. Broker has the financial capability to perform its obligations under this Agreement. 19.4. Licensee Indemnification. Licensee agrees to hold Broker, its partners, - 22 - officers, directors, agents, stockholders, employees, and subsidiaries, harmless from any and all claims, damages, liability, costs and expenses, including reasonable attorneys' fees, arising from the Licensee's operation of the Station, except as otherwise may be provided for in this Agreement. Licensee's obligation to hold Broker harmless against the liabilities specified above shall survive any termination of this Agreement until the expiration of all applicable statutes of limitation. 19.5. Broker Indemnification. Broker agrees to hold Licensee, its partners, officers, directors, agents, stockholders, employees, and subsidiaries, harmless from any and all claims, damages, liability, costs and expenses, including reasonable attorneys' fees, arising from the broadcasting of Broker's programs, except as may otherwise be provided for in this Agreement. Broker's obligation to hold Licensee harmless against the liabilities specified above shall survive any termination of this Agreement until the expiration of all applicable statutes of limitation. 20. LICENSEE CERTIFICATION. The Licensee certifies that under this Agreement, notwithstanding any provision that could be interpreted to the contrary, it maintains ultimate control over the Station's facilities, including specifically control over Station finances, personnel and programming. 21. BROKER CERTIFICATION. The Broker certifies that the arrangement provided for in this Agreement complies with Sections 73.3555(a)(1) and (e)(1) of the Commission's rules. - 23 - 22. MODIFICATION AND WAIVER. No modification or waiver of any provision of this Agreement shall in any event be effected unless the same shall be in writing and signed by the party adversely affected by the waiver or modification, and then such waiver and consent shall be effective only in the specific instance and for the purpose for which given. 23. NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of Licensee or Broker in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of Licensee and Broker herein provided are cumulative and are not exclusive of any right or remedies which it may otherwise have. 24. CONSTRUCTION. This Agreement shall be construed in accordance with the laws of the State of New Jersey and the obligations of the parties hereto are subject to all federal, state or municipal laws or regulations of the Commission and all other governmental bodies or authorities presently or hereafter to be constituted. 25. HEADINGS. The headings contained in this Agreement are included for convenience only and no such heading shall in any way alter the meaning of any provision. 26. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties and its respective successors and assigns, including, without - 24 - limitation, any assignee of the Commission license for the Station. 27. COUNTERPART SIGNATURES. This Agreement may be signed in one or more counterparts, each of which shall be deemed a duplicate original, binding on the parties hereto notwithstanding that the parties are not signatory to the original or the same counterpart. This Agreement shall be effective as of the date stated above on the first page of this Agreement. 28. ATTORNEYS FEES. If either party defaults in the performance of any of the terms or conditions of this Agreement, which default results in the filing of a lawsuit and/or action seeking equitable relief, the prevailing party in such lawsuit shall be entitled to a reimbursement of its reasonable attorneys' fees and costs. 29. NOTICES. Any notice required hereunder shall be in writing and any payment, notice or other communications shall be deemed given when mailed by certified mail or Federal Express, or U.P.S., postage prepaid, with return receipt requested, and addressed as follows: If to Licensee, to: Manahawkin Communications Corporation Attn: Patricia M. Stokes c/o J L Media, Inc. 1600 Route 22 Union, New Jersey 07083 with copy to: Stephen Diaz Gavin, Esquire Patton Boggs, L.L.P. - 25 - 2550 M Street, N.W. Washington, D.C. 20037 Joan Beth Hansen, Esquire President, Southern Ocean Broadcasting P.O. Box 4627 Toms River, NJ 08754-4627 Federal Express: 810 Hooper Avenue Toms River, NJ 08753 John F. Scarpa Jersey Devil Broadcasting Bayport 1, Suite 400 Verona Boulevard West Atlantic City, New Jersey 08232 Patricia Stokes, President Great American Broadcasting Co. c/o J L Media, Inc. 1600 Route 22 Union, New Jersey 07083 If to Broker, to: Nassau Broadcasting Partners, L.P. 600 Alexander Road - Building Two Princeton, NJ 08540 Attn: Louis F. Mercatanti with copy to: Mark D. Schorr Sterns & Weinroth, P.C. 50 West State Street, Suite 1400 Trenton, New Jersey 08607 and Cary S. Tepper Booth Freret Imlay & Tepper, P.C. 1233 20th Street, NW, Suite 204 - 26 - Washington, DC 20036 30. ENTIRE AGREEMENT. This Agreement embodies the entire agreement between the parties and there are no other agreements, representations, warranties, or understandings, oral or written, between them, that have not been duly signed by Broker and Licensee and attached hereto. No alterations, modifications or change of this Agreement shall be valid unless by like written instrument. 31. COUNSEL. Each party has been represented by its own counsel in connection with the negotiation and preparation of this Agreement, and consequently, each party hereby waives the application of any rule of law to the effect that any provision of this Agreement shall be interpreted or construed against the party whose counsel drafted that provision. 32. SEVERABILITY. In the event any provision contained in this Agreement is held to be invalid, illegal or unenforceable it shall not affect any other provision hereof, and this agreement shall be construed as if such invalid, illegal or unenforceable provisions had not been contained herein. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. LICENSEE MANAHAWKIN COMMUNICATIONS CORPORATION By: /s/ Patricia A. Stokes --------------------------------- Patricia A. Stokes President - 27 - BROKER NASSAU BROADCASTING PARTNERS, L.P. By: /s/ Louis F. Mercatanti, Jr. --------------------------------- Louis F. Mercatanti, Jr. Chairman SHAREHOLDER GREAT AMERICAN COMMUNICATIONS CO. By: /s/ Patricia A. Stokes --------------------------------- Patricia A. Stokes President SHAREHOLDER SOUTHERN OCEAN BROADCASTING, INC. By: Joan Beth Hansen --------------------------------- Joan Beth Hansen President - 28 - SHAREHOLDER JERSEY DEVIL BROADCASTING, INC. By: /s/ John F. Scarpa --------------------------------- John F. Scarpa President - 29 - EX-10.7 22 0022.txt 1ST AMENDMENT TO TIME BROKERAGE AGMT DTD 6/15/1999 Exhibit 10.7 FIRST AMENDMENT TO TIME BROKERAGE AGREEMENT THIS FIRST AMENDMENT (the "First Amendment") is made as of the 15th day of June, 1999, by and among Manahawkin Communications Corporation ("Licensee"), the permittee of the FM radio station on 105.7 MHz, Manahawkin, New Jersey, Jersey Devil Broadcasting, Inc. ("Jersey Devil"), Southern Ocean Broadcasting, Inc. ("Southern Ocean"), and Great American Communications Co. ("Great American") (collectively the "Licensee Shareholder Corporations"), and Nassau Broadcasting Partners, L.P. ("Broker"). Licensee, Licensee Shareholder Corporations, and Broker are hereinafter collectively referred to as the "Parties". RECITALS WHEREAS, the Parties entered into a certain Time Brokerage Agreement dated February 12, 1997 (the "Agreement"), which sets forth their agreements regarding Broker's use of broadcasting time and the grant of an option by Licensee and Licensee Shareholder Corporations to Broker for the purchase of the issued and outstanding shares of the capital stock of Licensee; WHEREAS, the Parties also entered into a certain Option Agreement dated February 12, 1997 (the "Option Agreement") and have fulfilled each of their obligations thereunder, except that Nassau has not yet paid to Southern Ocean its portion of the Option Payment, as defined in the original Section 18 of the Agreement, to secure the Option and the extension of time in which to make such payment has expired pursuant to Section 7(c) of the Option Agreement; and WHEREAS, Jersey Devil and Great American hereby acknowledge receipt of their respective portions of the Option Payment, as defined in the original Section 18 of the Agreement and that Broker has secured the Option with respect to their stock in Licensee and that the Option continues in full force and effect as to Jersey Devil and Great American; and WHEREAS, Nassau desires to secure the Option to acquire the stock of Licensee owned by Southern Ocean; and WHEREAS, as of the date hereof, Licensee, Licensee Shareholder Corporations and Broker continue to be the only parties to the Agreement; and WHEREAS, in light of new regulations adopted by the Federal Communications Commission ("FCC"), the Parties desire to amend the Agreement on the terms and conditions hereinafter set forth; and WHEREAS, Section 22 of the Agreement requires that any modification or amendment of the Agreement be in the form of an written instrument executed by all the Parties. NOW, THEREFORE, in consideration of the agreements herein contained, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties hereto do hereby agree to amend the Agreement as follows: 1. Definitions. For the purposes of this Amendment, all capitalized terms ----------- used herein shall have the meanings set forth in the Agreement. 2. Perfection of Option on Southern Ocean Stock. Southern Ocean hereby --------------------------------------------- agrees to seek any and all necessary approvals of the United States Bankruptcy Court for the District of New Jersey, Trenton Division (the "Bankruptcy Court") in order for Nassau to proceed with acquiring the Option to acquire Southern Ocean's stock in Licensee. No later than ten (10) business days from the date of this First Amendment, Southern Ocean will cause to be filed the necessary motion to obtain the approval of the Bankruptcy Court. Upon receipt of an order from the Bankruptcy Court approving Nassau's acquisition of the Option, Nassau will pay Southern Ocean the sum of Three Hundred Fifty-Seven Thousand One Hundred Twenty-Five Dollars and no Cents ($357,125.00) (the "Option Acquisition Payment"). Upon receipt of the Option Acquisition Payment by Southern Ocean, Nassau will have a fully vested Option in Southern Ocean's shares of Licensee. 2 3. Amendment to the Agreement. Effective the date hereof, Section 18.1 --------------------------- of the Agreement shall be amended by deleting such Section and inserting the following Section 18.1 in lieu thereof: 18.1. Purchase Option. The Licensee grants to Broker, Broker's ---------------- assignee or designee an option to acquire the stock of Licensee's Shareholder Corporations (the "Option"). The term of the Option shall run from February 16, 1999, which is the effective date of the FCC's Report and Order in MM Docket ----------------------------- No. 98-43, 13 FCC Rcd 23056 (1998), which eliminated the prohibition against - ---------- the sale of an unbuilt station, until the date that is one (1) year from the date of the filing of the Form 302-FM application (or successor application form) for license to cover the Station's construction permit, without regard to whether any of the other terms of this Agreement remain in effect (the "Option Term"). The Option shall entitle Broker to purchase the stock of Licensee's Shareholder Corporations for the aggregate amount of Four Million Six Hundred Seventy-Five Thousand Dollars and no cents ($4,675,000.00) (the "Option Price"). If Broker exercises the Option, Broker will deliver to each of Licensee's Shareholder Corporations in which the Option is being exercised the sum of Four Hundred Thousand Dollars and No Cents ($400,000.00) (each such exercise payment hereafter the "Deposit Payment") in immediately available funds. Broker shall deliver the Deposit Payment simultaneously with written notice to Licensee of the exercise of the Option. In the event that Broker were to exercise the Option, the FCC were to approve a transfer of control of the FCC Licenses, and the Parties were to consummate the sale of the stock of the Licensee's Shareholder Corporations, the Option Payment and the Deposit Payments to each Licensee Shareholder Corporation will be credited toward the Option Price paid to such Licensee Shareholder Corporation. The Option must be exercised in writing in accord with Section 29 of the Agreement. Upon receipt of the notice of exercise of the Option by the Broker, each Licensee Shareholder Corporation in which Broker has exercised the Option shall execute the Stock Purchase 3 Agreement in the form attached as an Exhibit to this First Amendment no later than five (5) business days after the receipt by Licensee of written notice of Broker's exercise of the Option. Consummation of any such transaction will not occur until receipt of all required FCC approvals. In light of the necessity of obtaining the prior approval of the Bankruptcy Court for acquisition of the Option as it relates to Southern Ocean, it is specifically contemplated that the exercise of the Option to acquire the Southern Ocean stock would occur at a date later than the exercise of the Option as it relates to the other Licensee Shareholder Corporations. This Section 18 survives any termination of this Agreement for whatever cause, unless mutually agreed otherwise. 4. The parties acknowledge that it is the express intention of Broker to exercise the option at the earliest possible date following the execution of this First Amendment. 5. In all other respects, the Agreement remains unchanged and in full force and effect. IN WITNESS WHEREOF, each of Licensee, Licensee's Shareholder Corporations, and Broker has caused this Amendment to be duly executed and delivery in its name and on its behalf as of the day first written above. LICENSEE MANAHAWKIN COMMUNICATIONS CORPORATION By: /s/ Patricia A. Stokes ----------------------------- Patricia A. Stokes President BROKER NASSAU BROADCASTING PARTNERS, L.P. By: /s/ Louis F. Mercatanti, Jr. ----------------------------- Louis F. Mercatanti, Jr. Chairman 4 SHAREHOLDER GREAT AMERICAN COMMUNICATIONS CO. By: /s/ Patricia A. Stokes ------------------------ Patricia A. Stokes President SHAREHOLDER JERSEY DEVIL BROADCASTING, INC. By: /s/ John F. Scarpa ------------------------ John F. Scarpa President SHAREHOLDER SOUTHERN OCEAN BROADCASTING, INC. By: /s/ Joan Beth Hansen ------------------------ Joan Beth Hansen President 5 EX-10.8 23 0023.txt LOAN AGMT AMONG NASSAU BROADCASTING Exhibit 10.8 LOAN AGREEMENT DATED AS OF AUGUST 28, 1998 among NASSAU BROADCASTING PARTNERS, L.P. as Borrower and AMRESCO COMMERCIAL FINANCE, INC. as Agent and the Lenders listed on the signature pages hereof 1 TABLE OF CONTENTS SECTION 1 AMOUNTS AND TERMS OF LOAN ....................................... 2 1.1 Loans ........................................................... 2 (A) Term A Loan ............................................... 2 (B) Term B Loans .............................................. 2 (C) Notes ..................................................... 2 1.2 Interest and Related Fees ....................................... 3 (A) Interest .................................................. 3 (B) Computation and Payment of Interest and Related Fees ...... 3 (C) Maximum Interest .......................................... 3 1.3 Other Fees and Expenses ......................................... 4 (A) Certain Fees .............................................. 4 (B) Fixed Rate Breakage Fee ................................... 4 (C) Expenses and Attorneys Fees ............................... 4 1.4 Payments ........................................................ 5 (A) Payment Delivery .......................................... 5 (B) Payments from Surplus Cash Flow ........................... 5 (C) Payment on the Termination Date ........................... 5 1.5 Prepayment of the Loans ......................................... 5 1.6 Term of the Agreement .......................................... 6 1.7 Loan Accounts ................................................... 6 1.8 Apportionment of Payments ....................................... 6 SECTION 2 AFFIRMATIVE COVENANTS ........................................... 6 2.1 Compliance With Laws ............................................ 7 2.2 Maintenance of Properties; Insurance ............................ 7 2.3 Inspection; Lender Meeting ...................................... 8 2.4 Partnership and/or Corporate Existence, Etc ..................... 8 2.5 Licenses and Permits ............................................ 8 2.6 LMA Licensees ................................................... 8 2.7 Surplus Cash Flow ............................................... 8 2.8 Consent to Foreclosure; Appointment of Receiver ................. 9 2.9 Further Assurances .............................................. 9 2.10 WSBG-FM and WVPO-AM Sale ........................................ 9 2.11 Permitted Dispositions .......................................... 9 2.12 Permitted Acquisitions .......................................... 10 (A) Purchase of WNJO-FM and WCHR-AM ........................... 10 (B) Purchase of WOBM .......................................... 10 (C) Purchase of WCHR-RM ....................................... 10 (D) Purchase of WDLC-AM and WTSX-FM ........................... 11 2.13 Restructure Transaction ......................................... 11 2.14 Debt Repayment Reserve .......................................... 11 i SECTION 3 NEGATIVE COVENANTS .............................................. 12 3.1 Indebtedness .................................................... 12 3.2 Liens and Related Matters ....................................... 12 (A) No Liens .................................................. 12 (B) No Negative Pledges ....................................... 12 3.3 Investments; Joint Ventures ..................................... 13 3.4 Contingent Obligations .......................................... 13 3.5 Restricted Junior Payments ...................................... 13 3.6 Restriction on Fundamental Changes .............................. 13 3.7 Disposal of Assets or Subsidiary Stock .......................... 14 3.8 Transactions with Affiliates .................................... 14 3.9 Conduct of Business ............................................. 14 3.10 Changes Relating to Investor Indebtedness ....................... 14 3.11 Fiscal Year ..................................................... 14 3.12 Press Release; Public Offering Materials ........................ 14 3.13 Subsidiaries .................................................... 15 3.14 Bank Accounts ................................................... 15 3.15 Use of Proceeds ................................................. 15 3.16 Advertising; Promotion .......................................... 15 3.17 Permitted Agreements ............................................ 15 3.18 No Transfer ..................................................... 15 3.19 Use of Trade .................................................... 15 3.20 Change in Name; Change in Call Letters .......................... 15 3.21 Limitation on Additional Securities ............................. 16 3.22 LMA Licensees ................................................... 16 3.23 Restructure Transaction ......................................... 16 SECTION 4 FINANCIAL COVENANTS/REPORTING ................................... 16 4.1 Capital Expenditure Limits ...................................... 16 4.2 Capital Lease Limits ............................................ 17 4.3 Corporate Overhead .............................................. 17 4.4 Net Working Capital ............................................. 17 4.5 Minimum Net Cash Revenues and Broadcast Cash Flow ............... 17 4.6 Financial Statements and Other Reports .......................... 18 (A) Monthly Financials ........................................ 18 (B) Accounts Receivable and Accounts Payable .................. 18 (C) Year-End Financials ....................................... 18 (D) Compliance Certificate and Surplus Cash Flow Certificate .. 18 (E) Accountants' Reports ...................................... 19 (F) Annual Fiscal Budget ...................................... 19 (G) Tax Returns ............................................... 19 (H) Events of Default, Etc .................................... 19 (I) Litigation ................................................ 19 (J) Supplemented Schedules; Notice of Corporate Changes ....... 19 ii (K) FCC Notices ............................................... 20 (L) Other Information ......................................... 20 4.7 Management Incentive ............................................ 20 4.8 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement ................................. 20 SECTION 5 REPRESENTATIONS AND WARRANTIES .................................. 20 5.1 Disclosure ...................................................... 21 5.2 No Material Adverse Effect ...................................... 21 5.3 No Conflict ..................................................... 21 5.4 Organization, Powers, Capitalization and Good Standing .......... 21 (A) Organization and Powers ................................... 21 (B) Capitalization ............................................ 22 (C) Binding Obligation ........................................ 22 (D) Qualification ............................................. 22 5.5 Financial Statements ............................................ 22 5.6 Intellectual Property ........................................... 22 5.7 Litigation: Adverse Facts ....................................... 23 5.8 Employee Matters ................................................ 23 5.9 Solvency ........................................................ 23 5.10 FCC Matters ..................................................... 23 5.10.1 Borrower Stations ............................................... 23 5.10.2 LMA Stations .................................................... 25 5.11 Title to Properties; Liens; Real Property ....................... 26 (A) Title to Properties; Liens ................................ 26 (B) Real Property ............................................. 26 5.12 Payment of Taxes ................................................ 26 5.13 Governmental Regulation ......................................... 27 5.14 Certain Fees .................................................... 27 SECTION 6 DEFAULT, RIGHTS AND REMEDIES .................................... 27 6.1 Event of Default ................................................ 27 (A) Interest and Fees ......................................... 27 (B) Payments .................................................. 27 (C) Termination Payment ....................................... 27 (D) Default in Other Agreements ............................... 27 (E) Breach of Certain Provisions .............................. 28 (F) Breach of Warranty ........................................ 28 (G) Involuntary Bankruptcy; Appointment of Receiver, Etc. ..... 28 (H) Voluntary Bankruptcy; Appointment of Receiver, Etc. ....... 28 (I) Other Defaults Under Loan Documents ....................... 28 (J) Governmental Liens ........................................ 29 (K) Judgment and Attachments .................................. 29 (L) Dissolution ............................................... 29 iii (M) Solvency .................................................. 29 (N) Injunction ................................................ 29 (0) ERISA; Pension Plans ...................................... 29 (P) Environmental Matters ..................................... 29 (Q) Invalidity of Loan Documents .............................. 30 (R) Damage; Strike; Casualty .................................. 30 (S) Failure of Security ....................................... 30 (T) Business Activities ....................................... 30 (U) CFO ....................................................... 30 (V) FCC Authorization ......................................... 30 (W) Broadcast Signal .......................................... 30 (X) Tower Site Lapse .......................................... 30 (Y) Material Adverse Effect ................................... 30 6.2 Acceleration and Suspension of Commitments ...................... 31 6.3 Remedies ........................................................ 31 6.4 Performance by Agent ............................................ 31 SECTION 7 CONDITIONS TO LOANS ............................................... 32 7.1 Conditions to Initial Loans ..................................... 32 7.2 Conditions to All Loans ......................................... 32 SECTION 8 LENDER AGREEMENTS ............................................... 33 8.1 Assignments and Participations in the Loans and Notes ........... 33 8.2 Agent ........................................................... 34 (A) Appointment ............................................... 34 (B) Nature of Duties .......................................... 34 (C) Rights, Exculpation, Etc. ................................. 35 (D) Reliance .................................................. 35 (E) Indemnification ........................................... 36 (F) AMRESCO Individually ...................................... 36 (G) Successor Agent ........................................... 36 (1) Resignation ......................................... 36 (2) Appointment of Successor ............................ 36 (3) Successor Agent ..................................... 37 (4) Compliance with Communications Act .................. 37 (H) Collateral Matters ........................................ 37 (1) Release of Collateral ............................... 37 (2) Confirmation of Authority; Execution of Releases .... 37 (3) Absence of Duty ..................................... 38 (I) Agency for Perfection ..................................... 38 8.3 Amendments, Consents and Waivers for Certain Actions ............ 38 8.4 Set Off and Sharing of Payments ................................. 38 8.5 Disbursement of Funds ........................................... 39 8.6 Disbursements of Payments ....................................... 39 iv (A) Loan Principal Payments ................................... 39 (B) Availability of Lender's Pro Rata Share ................... 39 (C) Return of Payments ........................................ 40 SECTION 9 MISCELLANEOUS ................................................... 40 9.1 Indemnities ..................................................... 40 9.2 Amendments and Waivers .......................................... 41 9.3 Notices ......................................................... 41 9.4 Failure or Indulgence Not Waiver; Remedies Cumulative ........... 43 9.5 Marshaling; Payments Set Aside .................................. 43 9.6 Severability .................................................... 43 9.7 Lenders' Obligations Several; Independent Nature of Lenders' Rights ....................................... 43 9.8 Headings ........................................................ 43 9.9 Applicable Law .................................................. 43 9.10 Successors and Assigns .......................................... 44 9.11 No Fiduciary Relationship ....................................... 44 9.12 Construction .................................................... 44 9.13 Advertising ..................................................... 44 9.14 Consent to Jurisdiction and Service of Process .................. 44 9.15 Waiver of Jury Trial ............................................ 45 9.16 Survival of Warranties and Certain Agreements ................... 45 9.17 Entire Agreement ................................................ 45 9.18 Counterparts; Effectiveness ..................................... 45 9.19 FCC Approval .................................................... 46 SECTION 10 DEFINITIONS ...................................................... 47 10.1 Certain Defined Terms ........................................... 47 10.2 Other Definitional Provisions ................................... 61 v EXHIBITS AND SCHEDULES Exhibits Exhibit 1.5(B) - Surplus Cash Flow Certificate Exhibit 4.6(D) - Compliance Certificate Exhibit 10.1(A) - Term A Loan Note Exhibit 10.1(B) - Term B Loan Note Schedules Schedule 3.1(F) - Purchase Money Liens and Capital Leases Schedule 3.2(A) - Permitted Encumbrances Schedule 3.3 - Investments Schedule 3.4 - Contingent Obligations Schedule 3.5 - Restricted Junior Payments Schedule 3.8 - Affiliate Transactions Schedule 3.15 - Disbursements and Authorization Schedule Schedule 3.17 - Permitted Agreements Schedule 5.3 - No Conflicts Schedule 5.4(A), (B) & (D) - Jurisdictions of Organization, Capitalization & Foreign Qualifications Schedule 5.6 - Intellectual Property Schedule 5.8 - Employee Matters Schedule 5.10.1 - FCC Matters - Borrower Stations Schedule 5.10.2 - FCC Matters - LMA Station Schedule 5.11 - Description of Real Property, Leases, Licenses & Other Interests in Real Estate Schedule 7.1 - Conditions to Loan Subschedule (1) - Litigation Subschedule (2) - Employee Benefit Plans Subschedule (3) - Closing Fees Subschedule (4) - Derivatives Subschedule (5) - Bank Accounts Subschedule (6) - Subsidiaries Subschedule (7) - Personal Property Collateral Schedule 10.1(A) - Investor Notes Schedule 10.1(B) - Investors Schedule 10.1(C) - Pro Forma vi LOAN AGREEMENT This LOAN AGREEMENT is dated as of August 28, 1998 and entered into by and among Nassau Broadcasting Partners, L.P., a Delaware limited partnership ("Borrower") with its principal place of business at 619 Alexander Road, Third Floor, Princeton, New Jersey 08540, AMRESCO Commercial Finance, Inc., a Nevada corporation, in its individual capacity ("AMRESCO"), whose address is 235 Peachtree Street, N.E., Atlanta, Georgia 30303, as a Lender (as hereinafter defined in Section 10), and as Agent for all Lenders, and such other Persons executing this Agreement as Lenders. R E C I T A L S: WHEREAS, Borrower desires that Lenders extend a single advance term credit facility and a multiple advance term credit facility to Borrower to fund the repayment of certain indebtedness of Borrower, to fund the reduction of the First Contingent Payment, to pay certain transaction fees, costs and expenses, to provide working capital financing for Borrower, and to provide funds for other general partnership purposes of Borrower; and WHEREAS, Borrower desires to secure all of the Obligations (as hereinafter defined in Section 10) under the Loan Documents (as hereinafter defined in Section 10) by granting to Agent, for the benefit of Agent and Lenders, a security interest in and lien upon all of its personal and real property; and WHEREAS, Nassau Broadcasting Partners, Inc., a Delaware corporation and the general partner of Borrower ("General Partner") is willing to guaranty the Obligations of Borrower to Lenders under the Loan Documents and pledge to Agent, for the benefit of Agent and Lenders, all of its partnership interest in Borrower to secure the Obligations and its obligations under such guaranty; and WHEREAS, Nassau Broadcasting Company, a New Jersey corporation ("NBC") and Nassau Holdings, Inc., a Delaware corporation ("NH", together with NBC, "Limited Partners"), are willing to guaranty the Obligations of Borrower to Lenders under the Loan Documents, and pledge to Agent for the benefit of Agent and Lenders, all of their partnership interests in Borrower to secure the Obligations and their obligations under each such guaranty; and NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Borrower, Lenders and Agent agree as follows: SECTION 1 AMOUNTS AND TERMS OF LOANS 1.1 Loans. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Borrower contained herein: (A) Term A Loan. Each Lender agrees, severally and not jointly, to lend to Borrower in one draw, on the Closing Date, its Pro Rata Share of the aggregate amount of $43,500,000 ("Term A Loan"). Amounts borrowed under this subsection 1.1(A) and repaid may not be reborrowed. (B) Term B Loans. (1) Each Lender agrees, severally and not jointly, to lend to Borrower from the Closing Date to the Expiry Date (or any extension thereof) its Pro Rata Share of the loans requested by Borrower to be made by Lenders under this subsection 1.1(B), up to an aggregate maximum amount for all Lenders of $3,500,000 (as the same may be reduced from time to time hereunder, the "Term B Loan Commitment"). Advances or amounts outstanding under the Term B Loan Commitment will be called "Term B Loans". Collectively, the Term A Loan and Term B Loans will be referred to as the "Loans". Amounts borrowed under this subsection 1.1(B) and repaid may not be reborrowed. Term B Loans may be requested in writing to Agent with three (3) Business Days prior notice, and in any amount equal to or greater than $250,000. Neither Agent nor any Lender shall incur any liability to Borrower for acting upon any notice that Agent believes in good faith to have been given by a duly authorized officer or other person authorized to borrow on behalf of Borrower. Default Interest shall accrue at the times required pursuant to Section 1.2(B) whether or not a judgment for any of the Obligations has been entered by a court. (2) Subject to Section 6.2(B) and each Lender's right to cease making Term B Loans to Borrower, upon the written request of Borrower delivered to Agent not more than sixty (60) days but not less than thirty (30) days prior to the Expiry Date, the Term B Loan Commitment may be renewed for a period of twelve consecutive months in the amount specified by Borrower in such notice which amount shall not exceed $3,500,000; provided, that (i) no Event of Default has occurred or existed during the thirty (30) day period immediately preceding the Expiry Date and (ii) Borrower pays to Lender on or before the Expiry Date a renewal fee equal to two percent (2%) of the Term B Loan Commitment in effect during such extension of the Term B Loan Commitment. (C) Notes. Borrower shall execute and deliver to each Lender (i) a Note to evidence the Term A Loan, such Note to be in the principal amount of such Lender's Pro Rata Share of the Term A Loan and (ii) a Note to evidence the Term B Loans, such Note to be in the principal amount of such Lender's Pro Rata Share of the Term Loan B Commitment. In the event of an assignment under subsection 8.1, Borrower shall, concurrent with the surrender of the assigning Lender's Notes, issue new Notes to reflect the interests of the assigning Lender and the Person to which interests are to be assigned. In the event of a reduction of the Term B Loan Commitment, Borrower shall, concurrent with the surrender of the existing Notes evidencing the 2 Term B Loan Commitment, issue new Notes to reflect each Lender's Pro Rata Share of the Term B Loan Commitment. 1.2 Interest and Related Fees. (A) Interest. From the date the Loans are made and the date the other Obligations become due, the Loans and the other Obligations shall (a) (i) bear interest at a fixed rate of eleven percent (11%) per annum (the "Current Interest"), and (ii) concurrently bear additional interest at a fixed rate of three and one-quarter percent (3.25%) per annum (the "Deferred Interest"), and (b) at all times that a Default or an Event of Default has occurred and is continuing, bear interest at a fixed rate of eighteen percent (18%) per annum (the "Default Interest"). Accrued interest which is not paid shall not bear interest. (B) Computation and Payment of Interest and Related Fees. Interest on the Loans and all other Obligations shall be calculated daily on the basis of a three hundred sixty (360) day year for the actual number of days elapsed in the period during which it accrues. The Funding Date of a Loan shall be included in the calculation of interest. The date of payment of a Loan shall be excluded from the calculation of interest. If a Loan is repaid on the same day that it is made, one (1) days' interest shall be charged. Current Interest on the Loans is payable in arrears on the first day of each month and on the Termination Date, whether by acceleration or otherwise. Unless paid pursuant to Sections 1.4(B) or 1.5, Deferred Interest and Default Interest on the Loans shall be payable on the Termination Date, whether by acceleration or otherwise. (C) Maximum Interest. It is the intention of Borrower and Lenders to conform strictly to the usury and similar laws relating to interest from time to time in force, and all agreements between Borrower, Agent and Lenders, whether now existing or hereafter arising and whether oral or written, are hereby expressly limited so that in no contingency or event whatsoever, whether by acceleration of maturity hereof or otherwise, shall the amount paid or agreed to be paid in the aggregate to Lenders or to Agent on behalf of Lenders as interest hereunder or under the other Loan Documents or in any other security agreement given to secure the Obligations, or in any other document evidencing, securing or pertaining to the indebtedness evidenced hereby or thereby, exceed the maximum amount permissible under applicable usury or such other laws (the "Maximum Amount"). If under any circumstances whatsoever fulfillment of any provision hereof or of any of the other Loan Documents, at the time performance of such provision shall be due, shall involve exceeding the Maximum Amount, then, ipso facto, the obligation to be fulfilled shall be reduced to the Maximum Amount. For the purposes of calculating the actual amount of interest paid and/or payable hereunder in respect of laws pertaining to usury or such other laws, all sums paid or agreed to be paid to Lenders for the use, forbearance or detention of the indebtedness of Borrower evidenced hereby, outstanding from time to time shall, to the extent permitted by applicable law, be amortized, pro rated, allocated and spread from the date of disbursement of the proceeds of the Loans until payment in full of all of such indebtedness, so that the actual rate of interest on account of such indebtedness is uniform throughout the term hereof. The terms and provisions of this subsection shall control and supersede every other provision of all agreements between the Loan Parties, Agent and Lenders. 3 If under any circumstances Lenders shall receive an amount which would exceed the Maximum Amount, such amount shall be deemed a payment in reduction of the principal amount of the Loans and shall be treated as a voluntary prepayment or if such amount exceeds the unpaid balance of the Loans and any other indebtedness of Borrower in favor of Lenders, the excess shall be deemed to have been a payment made by mistake and shall be refunded to Borrower. 1.3 Other Fees and Expenses. (A) Certain Fees. On the Closing Date, Borrower agrees to pay to Lenders a closing fee of $940,000 from the proceeds of the Loans advanced on the Closing Date. (B) Fixed Rate Breakage Fee. If Borrower prepays the principal balance of the Loans on or prior to the second anniversary of the Closing Date (regardless of the source of such prepayment and whether voluntary, by acceleration or otherwise and including prepayments as a result of any Annual Surplus Cash Flow Payment or prepayments from the proceeds of any insurance as set forth in Section 2.2), Borrower shall pay Agent, for the benefit of all Lenders entitled to a portion of such prepayment, an amount (the "Fixed Rate Breakage Fee") equal to (1) the aggregate amount of interest (the Current Interest plus the Deferred Interest) which would have otherwise been payable on the amount of the principal prepayment from the date of prepayment until August 28, 2000, minus (2) the aggregate amount of interest Lenders would earn if the prepaid principal amount were reinvested for the period from the date of prepayment until August 28, 2000 at the Treasury Rate. The term "Treasury Rate" shall mean a rate per annum (computed on the basis of actual days elapsed over a year of 360 days) equal to the rate determined by Agent (on the date three (3) Business Days prior to the date of prepayment), to be the yield expressed as a rate listed in The Wall Street Journal for United States Treasury securities having a term of not greater than twenty-four (24) months. The Fixed Rate Breakage Fee represents Lenders' reinvestment loss resulting from making a fixed rate loan. No amount will be payable pursuant to this subsection 1.3(B) if Borrower prepays the Obligations in full after the second anniversary of the Closing Date. (C) Expenses and Attorneys Fees. Borrower agrees to promptly pay all reasonable fees, costs and expenses (including those of attorneys, accountants, and appraisers and other consultants) incurred by Agent and the Lenders in connection with any matters contemplated by or arising out of the Loan Documents, in connection with the examination, review, due diligence investigation, documentation, negotiation and closing of the transactions contemplated herein and in connection with the continued administration of the Loan Documents including any amendments, modifications and waivers. Further, Borrower agrees to promptly pay all fees, costs and expenses incurred by Agent and Lenders in connection with any action to enforce any Loan Document or to collect any payments due from Borrower or any other Loan Party (including without limitation enforcement of guaranties, sale of, collection from, or other realization upon, Collateral, and in connection with any restructuring or refinancing of the credit arrangements provided in the nature of a "work-out" or pursuant to any insolvency or bankruptcy proceeding). All fees, costs and expenses for which Borrower is responsible under this subsection 1.3(C) shall be deemed part of the Obligations when incurred, and secured by the Collateral. 4 Prior to the Closing Date, Agent has received $100,000 from certain of the Loan Parties as a deposit against the expenses described in this subsection 1.3(C). Agent shall estimate the amount of expenses incurred through the Closing Date and after taking into account all deposits received, Agent shall estimate an additional amount to be deposited by Borrower, which amount shall be paid by Borrower to Agent on the Closing Date from proceeds of the Loans. 1.4 Payments. (A) Payment Delivery. Unless otherwise designated by Agent in writing, all payments by Borrower of the Obligations shall be delivered to Agent, for the benefit of Agent and Lenders, as applicable, by wire transfer of same day funds to the account listed below. ABA No.: 061000052 Account Number: 010-255-5209 Bank: NationsBank, N.A. Address: Atlanta, Georgia Reference: AMRESCO Commercial Finance, Inc. for the benefit of Nassau Broadcasting Partners, L.P. Borrower shall receive credit on the day of receipt for funds received by Agent by 2:00 p.m. Atlanta, Georgia time. In the absence of timely receipt, such funds shall be deemed to have been paid on the next Business Day. Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, the payment may be made on the next succeeding Business Day and such extension of time shall be included in the computation of the amount of interest and fees due hereunder. (B) Payments from Surplus Cash Flow. On the Annual Surplus Cash Flow Payment Date, Borrower shall repay the Loans in an amount equal to the Annual Surplus Cash Flow Payment. The calculation shall be based on the audited financial statements for Borrower for the immediately preceding fiscal year and in accordance with the certificate attached hereto as Exhibit 1.5(B). Such payments shall be applied first, to unpaid expenses and fees, if any, on the Loans, second, to accrued but unpaid Default Interest, third, to past due Current Interest, fourth, to accrued but unpaid Deferred Interest, fifth, to any applicable Fixed Rate Breakage Fee, sixth, as a payment on the principal of the Loans, pro rata and last, to the remaining Obligations, if any. (C) Payment on the Termination Date. On the Termination Date all of the accrued but unpaid Current Interest, all of the accrued but unpaid Deferred Interest, all of the accrued but unpaid Default Interest, all of the outstanding principal balance of the Loans, and any other unpaid Obligations shall become due and payable. 1.5 Prepayment of the Loans. Borrower shall prepay the Loans from the proceeds of insurance as set forth in Section 2.2. Except for prepayments of the Loans with Annual Surplus Cash Flow Payments pursuant to Section 1.4(B) or payments from the proceeds of insurance pursuant to Section 2.2, Borrower may not prepay the Loans in whole or in part 5 prior to the Prepayment Date. At any time on and after the Prepayment Date, Borrower may prepay the Loans in whole, but not in part, together with any Fixed Rate Brokerage Fees, if applicable. Any prepayments made from Annual Surplus Cash Flow Payments pursuant to Section 1.4(B) or from the proceeds of insurance pursuant to Section 2.2 shall be permitted and, to the extent applied to the principal portion of the Loans, shall constitute prepayments subject to the Fixed Rate Breakage Fee. 1.6 Term of the Agreement. All of the Obligations shall become due and payable as otherwise set forth herein, but in any event, all of the remaining Obligations shall become due and payable on the Termination Date. Upon such date and following repayment in full of the Obligations, this Agreement will terminate except for any representations, warranties or indemnities which by their terms survive the termination of this Agreement. Notwithstanding any such termination, until all Obligations have been fully paid and satisfied, Agent, for the benefit of Agent and Lenders, shall be entitled to retain the security interests in the Collateral granted under the Security Documents and the ability to exercise all rights and remedies available to them under the Loan Documents and applicable laws. 1.7 Loan Accounts. Agent will maintain loan account records (the "Loan Account Records") for (a) the Loans, interest charges and payments thereof, (b) the charging and payment of all fees, costs and expenses, and (c) all other debits and credits pursuant to this Agreement. The balance in the loan accounts shall be presumptive evidence of the amounts due and owing to Lenders, provided that any failure by Agent to so record shall not limit or affect the Borrower's obligation to pay. During the continuance of any Event of Default, Borrower irrevocably waives the right to direct the application of any and all payments, and Borrower hereby irrevocably agrees that Agent shall have the continuing exclusive right to apply and reapply payments in any manner it deems appropriate. Agent shall provide Borrower with such information concerning the Loan Account Records as Borrower may from time to time reasonably request. 1.8 Apportionment of Payments. Any payments in respect of the Loans shall be apportioned among and promptly delivered to the Lenders in accordance with their respective Pro Rata Shares. All such payments received by Agent shall be distributed to each Lender, at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request. SECTION 2 AFFIRMATIVE COVENANTS Borrower covenants and agrees that until payment in full of all Obligations, Borrower shall perform and comply with, and shall cause each of the other Loan Parties to perform and comply with, all covenants in this Section 2 applicable to such Person. 6 2.1 Compliance With Laws. Borrower will (a) comply with and will cause each of its Subsidiaries to comply with the requirements of all applicable laws, rules, regulations and orders of any governmental authority (including, without limitation, laws, rules, regulations and orders relating to taxes, employer and employee contributions, securities, employee retirement and welfare benefits, environmental protection matters and employee health and safety) as now in effect and applicable to it and which may be imposed on it in the future in all jurisdictions in which Borrower or its Subsidiaries are now doing business or may hereafter be doing business, and (b) maintain or obtain and will cause each of its Subsidiaries to maintain or obtain, all licenses, qualifications and permits now held or hereafter required to be held by Borrower and its Subsidiaries, for which the loss, suspension, revocation or failure to obtain or renew, could have a Material Adverse Effect. This subsection 2.1 shall not preclude Borrower or any of its Subsidiaries from contesting any taxes or other payments, if they are being diligently contested in good faith and if appropriate expense provisions or reserves have been recorded or taken in conformity with GAAP. Borrower represents and warrants that as of the date hereof, it (i) is in compliance and each of its Subsidiaries is in compliance with the requirements of all applicable laws, rules, regulations and orders of any applicable governmental authority as now in effect, and (ii) maintains and each of its Subsidiaries maintains all licenses, qualifications and permits referred to above. 2.2 Maintenance of Properties; Insurance. Borrower will maintain or cause to be maintained in good repair, working order and condition all material properties used in the business of Borrower and its Subsidiaries and will make or cause to be made all appropriate repairs, renewals and replacements thereof. Borrower will maintain or cause to be maintained, with financially sound and reputable insurers, public liability, property damage and casualty insurance with respect to its business and properties and the business and properties of its Subsidiaries against loss or damage of the kinds customarily carried or maintained by entities of established reputation engaged in similar businesses and in amounts reasonably acceptable to Agent and will deliver evidence thereof to Agent. Borrower shall maintain key man life insurance on Mercatanti in the amount of $2,000,000, and cause such life insurance policy to be assigned to Agent for the benefit of Lenders on terms and conditions reasonably acceptable to Agent. No later than the first Business Day following the date of receipt by Borrower or Agent of any proceeds of any key man life insurance, such proceeds shall be applied first, to unpaid expenses and fees, if any, on the Loans, second, to accrued but unpaid Default Interest, third, to past due Current Interest, fourth, to accrued but unpaid Deferred Interest, fifth, to any applicable Fixed Rate Breakage Fee, sixth, as a payment on the principal of the Loans, pro rata, and last, to the remaining Obligations, if any. Upon receipt by Borrower or Agent of any proceeds of any casualty insurance, (a) so long as no Default or Event of Default shall have occurred and be continuing, Borrower shall (i) promptly and diligently apply such proceeds to pay or reimburse the costs of repairing, restoring or replacing the assets in respect of which such proceeds were received with any remainder of such proceeds, after repairing, restoring or replacing the assets, to be used by Borrower for working capital purposes, or (ii) to the extent such assets are not repaired, restored or replaced, to prepay the Obligations as set forth in clause (b); and (b) if a Default or Event of Default shall have occurred and be continuing, such proceeds shall, no later than the first Business Day following the date of receipt of such proceeds, be applied first, to unpaid expenses and fees, if any, on the Loans, second, to accrued but unpaid Default Interest, 7 third, to past due Current Interest, fourth, to accrued but unpaid Deferred Interest, fifth, to any applicable Fixed Rate Breakage Fee, sixth, as a payment on the principal of the Loans, pro rata and last, to the remaining Obligations, if any. Borrower shall cause, pursuant to endorsements and assignments in form and substance reasonably satisfactory to Agent, (i) Agent, for the benefit of Agent and Lenders, to be named as lenders' loss payee in the case of casualty insurance, (ii) Agent, for the benefit of Agent and Lenders, to be named as additional insured in the case of all liability insurance and (iii) Agent, for the benefit of Agent and Lenders, to be named as assignee in the case of all key man life insurance and to provide for at least 30 days prior written notice to Agent of any modification or cancellation of any such policy. Borrower represents and warrants that it and each of its Subsidiaries currently maintains all material properties as set forth above and maintains all insurance described above. 2.3 Inspection; Lender Meeting. Borrower shall permit any authorized representatives of Agent to visit and inspect any of the properties of Borrower or any of its Subsidiaries, including its and their financial and accounting records, and to make copies and take extracts therefrom, and to discuss its and their affairs, finances and business with its and their officers and certified public accountants, at such reasonable times during normal business hours and as often as may be reasonably requested. Representatives of each Lender will be permitted to accompany representatives of Agent during each visit, inspection and discussion referred to in the immediately preceding sentence. Without in any way limiting the foregoing, Borrower will participate and will cause its key management personnel to participate in a meeting with Agent and Lenders at least once during each year, which meeting shall be held at such time and such place as may be reasonably requested by Agent. 2.4 Partnership and/or Corporate Existence, Etc. Borrower will, and will cause each of its Subsidiaries to, at all times preserve and keep in full force and effect their partnership or corporate existence and all rights, licenses, and franchises material to their business. 2.5 Licenses and Permits. Borrower shall maintain in full force and effect the FCC Authorizations for the Borrower Stations and shall remain in material compliance with the Communications Act. Borrower shall use its best efforts to cause the LMA Licensees to maintain in full force and effect the FCC Authorizations for the LMA Stations and to remain in material compliance with the Communications Act. 2.6 LMA Licensees. Borrower shall use its best efforts to cause the LMA Licensees to conduct their business with respect to the LMA Stations consistent with the covenants set forth in this Section 2. 2.7 Surplus Cash Flow. All Surplus Cash Flow (in excess of the Annual Surplus Cash Flow Payment and the Management Incentive), including any portion of the Management Incentive not paid as a result of a Default or Event of Default, shall be retained by the Borrower and used solely for general partnership purposes. 8 2.8 Consent to Foreclosure; Appointment of Receiver. Borrower agrees to, consents to, and shall cooperate with the foreclosure, liquidation or other realization of any and all Collateral, whether through the appointment of a receiver or through such other judicial or non-judicial foreclosure proceedings conducted or initiated by Agent should an Event of Default occur pursuant to subsection 6.1(A), 6.1(B) or 6.1(C). 2.9 Further Assurances. (A) Borrower shall and shall cause any Loan Party to, from time to time, execute such guaranties, financing statements, documents, security agreements and reports as Agent at any time may reasonably request to evidence, perfect or otherwise implement the guaranties and security for repayment of the Obligations contemplated by the Loan Documents. (B) At Agent's request, Borrower shall cause any Subsidiaries of Borrower (which may exist as permitted by Section 2.12 or as otherwise consented to by Agent) promptly to guaranty the Obligations and to grant to Agent, for the benefit of Agent and Lenders, a security interest in the real, personal and mixed property of such Subsidiary to secure the Obligations. The documentation for such guaranty or security shall be similar to the Loan Documents executed concurrently herewith with such modifications as are reasonably requested by Agent. 2.10 WSBG-FM and WVPO-AM Sale. On or before August 31, 1999, Borrower shall consummate the Stroudsburg Sale and cause Borrower to receive from such sale Net Proceeds of not less than $6,000,000, on terms and conditions in form and substance satisfactory to Agent. Promptly upon the receipt thereof Borrower shall provide to Agent true, correct and complete copies of any drafts of any documents evidencing the Stroudsburg Sale, and true, correct and complete copies of all executed documents evidencing any Stroudsburg Sale not more than five (5) Business Days after the completion of any such sale. All Net Proceeds from the Stroudsburg Sale shall (i) if a Default or Event of Default has occurred and is continuing at the time the Stroudsburg Sale is consummated, be applied as a prepayment of the Obligations in the manner specified in Section 1.4(B), and (ii) if no Default or Event of Default has occurred and is continuing at the time the Stroudsburg Sale is consummated, be used for Borrower's general partnership purposes and constitute part of the Collateral. 2.11 Permitted Dispositions. Borrower may, and to the extent required, Tower Holdings may, after obtaining any necessary FCC consents, convey, transfer or otherwise dispose of all its rights (including any FCC Authorizations) with respect to (i) all assets related to WCHR-AM, licensed to Trenton, New Jersey, (ii) the expanded AM radio band relating to WTTM-AM, licensed to Princeton, New Jersey, (iii) the real property located at 50 Washington Road, West Windsor, New Jersey (the "Washington Road Transfer"), provided the Commerce Bank Liens are terminated at the time of such Transfer, or (iv) Tower Holdings; provided, (x) Borrower, or Tower Holdings in the case of the Washington Road Transfer, receives at the time of such conveyance, transfer or disposition, consideration at least equal to the fair market value of such assets, determined at such conveyance, transfer or disposition, (y) such consideration is in the form of cash, and (z) such conveyance, transfer or disposition is negotiated on an arm's length basis and made to a Person who is not an Affiliate (each a "Permitted Disposition" or collectively, the "Permitted Dispositions"). All Net Proceeds received by Borrower from any Permitted 9 Disposition shall be applied to the Obligations in the manner specified in Section 1.4(B) if a Default or Event of Default has occurred or is continuing at the time any such Permitted Disposition is consummated. So long as no Default or Event of Default has occurred and is continuing at the time any such Permitted Disposition is consummated, fifty percent (50%) of such Net Proceeds shall be applied to the Obligations in the manner specified in Section 1.4(B) and the remaining fifty percent (50%) of such Net Proceeds received by Borrower shall be retained by Borrower and used for general partnership purposes permitted by this Agreement; provided, that, in the event the consummation of the purchase by Borrower of, and the FCC approved assignment of the FCC Authorization for, WOBM is accelerated (or additional deposits are made pursuant to the WOBM Purchase Agreement) and such consummation occurs or additional deposits are made on a date which is within fifteen (15) days after the receipt of such Net Proceeds and such consummation occurs or additional deposits are made on or before July 1, 2000, and no Default or Event of Default has occurred and is continuing, twenty percent (20%) of such Net Proceeds shall be applied to the Obligations in the manner specified in Section 1.4(B) and the remaining eighty percent (80%) of such Net Proceeds shall be used by Borrower to make additional deposits pursuant to the WOBM Purchase Agreement or pay the purchase price for WOBM. 2.12 Permitted Acquisitions. (A) Purchase of WNJO-FM and WCHR-AM. On or before January 31, 1999, Borrower shall, subject only to the approval by the FCC of the assignment of the FCC Authorizations related thereto, consummate the acquisition of WNJO-FM licensed to Trenton, New Jersey, and WCHR-AM licensed to Trenton, New Jersey, by delivering to Great Scott Broadcasting, Ltd. a payment of $2,600,000. (B) Purchase of WOBM. On or before July 1, 2000, Borrower shall, subject only to the approval by the FCC of the assignment of the FCC Authorizations related thereto, or transfer of control over North Shore Broadcasting Corp., a New Jersey corporation ("North Shore") and Seashore Broadcasting, Corp., a New Jersey corporation ("Seashore"), consummate the acquisition of WOBM by delivering to the sellers under that certain Stock Purchase Agreement dated July 1, 1996 (the "WOBM Purchase Agreement"), payments totaling $14,000,000. Borrower shall pledge to Agent, for the benefit of Lenders, the stock of North Shore and Seashore, when such stock is acquired by Borrower pursuant to the WOBM Purchase Agreement. (C) Purchase of WCHR-FM. Borrower shall, subject only to the approval by the FCC of the assignment of the FCC Authorizations related thereto, or transfer of control over Manahawkin Communications Corp. ("Manahawkin"), consummate the acquisition of WCHR-FM, licensed to Manahawkin, New Jersey, by delivering to the sellers the purchase price thereof in accordance with that certain Escrow Agreement dated February 12, 1997 ("Manahawkin Escrow Agreement"), among Borrower, Manahawkin, Jersey Devil Broadcasting, Inc., Southern Ocean Broadcasting, Inc. and Great American Broadcasting, Inc.; provided, however, Borrower may limit its purchase to two-thirds of the stock of Manahawkin as contemplated pursuant to the Manahawkin Escrow Agreement and related documents. Borrower 10 shall pledge to Agent, for the benefit of Lenders, the stock of Manahawkin when such stock is acquired by Borrower pursuant to the Manahawkin Escrow Agreement. (D) Purchase of WDLC-AM and WTSX-FM. Borrower shall, subject only to the approval by the FCC of the assignment of the FCC Authorizations related thereto, consummate the acquisition of WDLC-AM, licensed to Port Jervis, New York, and WTSX-FM, licensed to Port Jervis, New York, by delivering to the seller the purchase price thereof in accordance with that certain Option Agreement dated August 7, 1998 between Borrower and Port Jervis Broadcasting Co., Inc. 2.13. Restructure Transaction. Borrower shall cause General Partner, Limited Partners, Holdings, Mercatanti and the Investors to execute and deliver to Agent, for the benefit of Lenders, such guaranties and pledge agreements as Agent shall request to perfect its Lien in the Collateral resulting from the consummation of the Restructure Transaction. 2.14 Debt Repayment Reserve. One the Closing Date, Agent shall retain and hold in escrow from the proceeds of the Loans the sum of $13,000,000.00 (as may be reduced pursuant hereto, the "Debt Repayment Reserve"). The Debt Repayment Reserve, until disbursed in accordance with this Section 2.14, shall secure, on a first priority basis, the Obligations, and Borrower hereby grants to Agent, for the benefit of Lenders, a security interest in the Debt Repayment Reserve. The Debt Repayment Reserve shall at all times be considered Loans, which shall accrue interest in favor of the Lenders in accordance with Section 1. Agent shall have control over the Debt Repayment Reserve, which shall constitute part of the Collateral. Upon the occurrence of an Event of Default, Agent may set-off and apply against the Obligations any remaining portion of the Debt Repayment Reserve. Provided no Event of Default has occurred and is continuing, Borrower may use the Debt Repayment Reserve to pay any or all of the Investor Indebtedness, the Second Preferred Amount or the First Contingent Payment. Disbursements of the Debt Repayment Reserve may be requested by Borrower in writing to Agent with three (3) Business Days prior notice, and in any amount equal to or greater than $1,000,000.00 (or the remaining balance of the Debt Payment Reserve if less than $1,000,000), which notice shall include the written consent to such disbursement of each Investor, in form and substance acceptable to Agent. Upon the disbursement of any of the Debt Repayment Reserve for payment in full of the Second Preferred Amount, Borrower shall cause all Liens held by any Investor on the Second Preferred Amount to be released. Provided no Event of Default has occurred and is continuing, the Debt Repayment Reserve (as reduced by any disbursements) shall accrue interest daily at the same rate Agent pays on other reserves, which rate may be adjusted from time to time, from the Closing Date to the date all of the Debt Repayment Reserve has been disbursed. The date of a disbursement shall be excluded from the calculation of interest on such portion of the Debt Repayment Reserve disbursed. Borrower shall and shall cause any Loan Party from time to time to execute such documents as Agent shall request to evidence and implement the provisions of this Section 2.14. 11 SECTION 3 NEGATIVE COVENANTS Borrower covenants and agrees that until payment in full of all Obligations, Borrower shall perform and comply with, and shall cause each of the other Loan Parties to perform and comply with, all covenants in this Section 3 applicable to such Person. 3.1 Indebtedness. Borrower will not and will not permit any of its Subsidiaries directly or indirectly to create, incur, assume, guaranty, or otherwise become or remain directly or indirectly liable with respect to any Indebtedness except: (A) the Obligations; (B) the WSUS Studio Payment, provided the outstanding principal balance of the WSUS Studio Payment does not exceed $250,000; (C) the WILT/WKRF Note, provided the outstanding principal balance of the WILT/WKRF Note does not exceed $325,000; (D) the Investor Notes, provided the outstanding aggregate principal balance of the Investor Notes does not exceed $29,119,055.98 (plus any amount remaining in the Debt Repayment Reserve); (E) Indebtedness incurred after the Closing Date with respect to Capital Lease Obligations permitted pursuant to Section 4.2; and (F) Indebtedness outstanding on the Closing Date secured by purchase money Liens and Capital Leases described on Schedule 3.1(F) annexed hereto.. 3.2 Liens and Related Matters. (A) No Liens. Borrower will not and will not permit any of its Subsidiaries directly or indirectly to create, incur, assume or permit to exist any Lien on or with respect to any property or asset (including any document or instrument with respect to goods or accounts receivable) of Borrower or any of its Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, except Permitted Encumbrances. (B) No Negative Pledges. Borrower will not and will not permit any of its Subsidiaries directly or indirectly to enter into or assume any agreement (other than the Loan Documents and the Investor Loan Documents) prohibiting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired. 12 3.3 Investments; Joint Ventures. Borrower will not and will not permit any of its Subsidiaries directly or indirectly to make or own any Investment in any Person except the Investments listed on Schedule 3.3. 3.4 Contingent Obligations. Borrower will not and will not permit any of its Subsidiaries directly or indirectly to create or become or be liable with respect to any Contingent Obligation except those: (A) resulting from endorsement of negotiable instruments for collection in the ordinary course of business; (B) existing on the Closing Date and described in Schedule 3.4 annexed hereto; (C) arising under indemnity agreements to title insurers to cause such title insurers to issue to Agent mortgagee title insurance policies; (D) incurred in the ordinary course of business with respect to surety and appeal bonds, performance and return-of-money bonds and other similar obligations not exceeding at any time outstanding $25,000 in aggregate liability; (E) incurred with respect to Indebtedness permitted by subsection 3.1; and (F) not permitted by clauses (A) through (E) above, so long as any such Contingent Obligations, in the aggregate at any time outstanding, do not exceed $25,000. 3.5 Restricted Junior Payments. Borrower will not and will not permit any of its Subsidiaries directly or indirectly to declare, order, pay, make or set apart any sum for any Restricted Junior Payment, except that so long as no Default or Event of Default exists at the time of any such Restricted Junior Payment or would occur after giving effect to any such Restricted Junior Payment and subject to prior FCC approval (to the extent required by law): (A) Tower Holdings may make Restricted Junior Payments to Borrower and General Partner with respect to its membership interests; (B) Tower Holdings may make Restricted Junior Payments with the Washington Road Proceeds to the Persons and in the amounts specified in Schedule 3.5, to the extent such Washington Road Proceeds result from a Permitted Disposition and provided the Commerce Bank Liens are terminated; and (C) Borrower may make Restricted Junior Payments from the Debt Repayment Reserve to the extent permitted by and subject to the restrictions set forth in Section 2.14. 3.6 Restriction on Fundamental Changes. Except for the acquisitions permitted pursuant to Section 2.12, the Restructure Transaction and as permitted pursuant to Section 3.23, Borrower will not, nor will Borrower permit any of its Subsidiaries directly or indirectly to: (a) amend, modify or waive any term or provision of its agreement of limited 13 partnership, certificate of limited partnership, articles of incorporation, certificates of designations pertaining to capital stock or by-laws unless required by law; (b) enter into any transaction of merger or consolidation; (c) liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution); or (d) acquire by purchase or otherwise all or any substantial part of the business or assets of any other Person. 3.7 Disposal of Assets or Subsidiary Stock. Except for the Permitted Dispositions and the Stroudsburg Sale, Borrower will not and will not permit any of its Subsidiaries directly or indirectly to: convey, sell, lease, sublease, transfer or otherwise dispose of or grant any Person an option to acquire, in one transaction or a series of transactions, any of its property, business or assets, or the capital stock of or other equity interests in any of its Subsidiaries, whether now owned or hereafter acquired, except for bona fide sales of assets for fair market value in the ordinary course of business which do not exceed in the aggregate $50,000 in any fiscal year. 3.8 Transactions with Affiliates. Borrower will not and will not permit any of its Subsidiaries directly or indirectly to enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate, except (a) as set forth on Schedule 3.8 or (b) for reimbursement of reasonable and necessary expenses to any director, officer or employee of any Loan Party in the ordinary course of business of Borrower or any of its Subsidiaries. Notwithstanding the foregoing, no payments may be made with respect to any items set forth on Schedule 3.8 upon the occurrence and during the continuation of a Default or Event of Default. 3.9 Conduct of Business. Borrower will not and will not permit any of its Subsidiaries directly or indirectly to engage in any business other than the ownership and operation of the Stations and related towers, and ownership of the Investments listed on Schedule 3.3. 3.10 Changes Relating to Investor Indebtedness. Borrower will not and will not permit any of its Subsidiaries directly or indirectly to change or amend the terms of any Investor Indebtedness; provided, however, after notice to Agent, Borrower may amend the Investor Indebtedness to (a) transfer notes evidencing the Investor Indebtedness among the Investors to the extent permitted by the Subordination Agreement, and (b) increase the interest rate payable thereunder up to three percent (3%) above the interest rate applicable to the Investor Indebtedness on the Closing Date. 3.11 Fiscal Year. Borrower will not and will not permit any of its Subsidiaries to change its fiscal year. 3.12 Press Release; Public Offering Materials. Unless otherwise required by applicable law (in which case Borrower will advise Agent and Lenders prior to making the disclosure), Borrower will not and will not permit any of its Subsidiaries to disclose the name of Agent or any Lender in any press release or in any prospectus, proxy statement or other materials filed with any governmental entity. 14 3.13 Subsidiaries. Borrower will not and will not permit any of its Subsidiaries directly or indirectly (i) to establish, create or acquire any new Subsidiary or (ii) sell, assign, pledge or otherwise encumber or dispose of any shares of capital stock or other equity securities of any of its Subsidiaries. 3.14 Bank Accounts. Borrower will not and will not permit any of its Subsidiaries to establish any new bank accounts without prior written notice to Agent and unless Agent and the bank at which the account is to be opened enter into a bank agency agreement in form and substance satisfactory to Agent. 3.15 Use of Proceeds. Borrower will not and will not permit any of its Subsidiaries to use the proceeds of the Loans for any purpose other than as set forth on Schedule 3.15. 3.16 Advertising; Promotion. Borrower will not and will not permit any of its Subsidiaries to incur expenses or contingent liabilities related to advertising and promotions in excess of reasonable and customary amounts for radio stations of similar size in comparable markets. 3.17 Permitted Agreements. Borrower will not and will not permit any of its Subsidiaries to enter into any asset purchase agreements, stock purchase agreements, local management agreements, local marketing agreements, joint sales agreements, time brokerage agreements or any like agreements (excluding lease or license agreements relating to tower sites or sub-carrier agreements, as long as none of such agreements adversely effect the FCC Authorizations), except for the agreements listed on Schedule 3.17 hereto, which agreements may not be amended, modified or waived. 3.18 No Transfer. Notwithstanding Section 3.7, Borrower will not (i) assign, or seek the assignment of its FCC Authorizations; or (ii) transfer or assign or seek the transfer or assignment of title to the Stations and the Collateral related to the operation thereof; provided, however, Borrower may consummate the (1) Restructure Transaction in accordance with Section 2.13 and (2) Permitted Dispositions. 3.19 Use of Trade. Borrower will not engage in use of trade in amounts in excess of the amounts which are reasonable and customary for radio stations comparable to the Stations as determined by Agent in its reasonable discretion. Within thirty (30) days of receipt of the monthly financial statements required pursuant to subsection 4.6(A), Agent shall notify Borrower, in writing, if Borrower's use of trade is not acceptable to Agent and, in such event, Borrower shall take reasonable steps to limit Borrower's use of trade in the prospective months to amounts acceptable to Agent. 3.20 Change in Name; Change in Call Letters. Borrower will not cause, permit or suffer any change in the name of Borrower or the call letters of any of the Borrower Stations; 15 provided, however Borrower may change the call letters of the Borrower Stations after thirty (30) days prior written notice to Agent. 3.21 Limitation on Additional Securities. After the Closing Date and so long as any of the Obligations are unpaid and outstanding, Borrower shall not and shall cause its Subsidiaries to not issue any capital stock, or any warrants, options, or other securities which evidence a right to subscribe for, purchase or otherwise acquire any shares of capital stock of Borrower or any Subsidiary of Borrower, except pursuant to the stock option agreement disclosed on Subschedule 2 to Schedule 7.1. 3.22 LMA Licensees. Borrower shall use its best efforts to cause the LMA Licensees to conduct their business with respect to the LMA Stations consistent with the convenants in this Section 3 that are applicable thereto. 3.23 Restructure Transaction. Borrower will not amend, modify or waive any term or provision of the Restructure Agreement, except Borrower may amend the Partnership Agreement to delete the Second Preferred Amount in the event such Second Preferred Amount is paid to Holdings. SECTION 4 FINANCIAL COVENANTS/REPORTING Borrower covenants and agrees that until payment in full of all Obligations, Borrower shall perform and comply with, and shall cause each of the other Loan Parties to perform and comply with, all covenants in this Section 4 applicable to such Person. 4.1 Capital Expenditure Limits. The aggregate amount of all Capital Expenditures of Borrower incurred for the periods set forth below will not be greater than the amount set forth below for such period. Period Amount ------ ------ Closing Date to December 31, 1998 $100,000 January 1, 1999 to December 31, 1999, $250,000 and each fiscal year thereafter In addition to the foregoing Borrower may, (i) subject to the prior written approval of Agent of the terms and conditions of each such Capital Expenditure, according to Agent's sole and absolute discretion, incur Capital Expenditures relating to the acquisition of additional radio stations and the purchase and construction of radio towers, antenna and related broadcasting equipment for the stations and the construction of improvements related thereto, (ii) incur Capital Expenditures in an aggregate amount not to exceed $325,000 relating to the construction costs 16 for WCHR-FM, licensed to Manahawkin, New Jersey, and (iii) incur Capital Expenditures in an aggregate amount not to exceed $150,000 relating to the construction costs for the expanded AM radio band relating to WTTM-AM, licensed to Princeton, New Jersey. 4.2 Capital Lease Limits. The aggregate amount of all Capital Lease Obligations of Borrower incurred for the periods set forth below will not be greater than the amount set forth below for such period. Period Amount ------ ------ Closing Date to December 31, 1998 $16,333 January 1, 1999 to December 31, 1999, $50,000 and each fiscal year thereafter 4.3 Corporate Overhead. Borrower shall not permit Corporate Overhead of Borrower and its Subsidiaries in the aggregate for the periods set forth below, to be greater than the amount set forth below for such period. Period Amount ------ ------ January 1, 1998 to December 31, 1998 $1,850,000 January 1, 1999 to December 31, 1999 $2,000,000 January 1, 2000 to December 31, 2000, $2,150,000 and each fiscal year thereafter 4.4 Net Working Capital. Borrower shall not permit Net Working Capital as of the last day of each month to be less than $2,250,000. 4.5 Minimum Net Cash Revenues and Broadcast Cash Flow. Borrower shall not permit Net Cash Revenues or Broadcast Cash Flow during the periods set forth below to be less than the amount set forth below for such period. Net Cash Broadcast Period Revenues Cash Flow ------ -------- --------- January 1, 1998 to December 31, 1998 $21,000,000 $7,250,000 January 1, 1999 to December 31, 1999 $24,000,000 $9,000,000 January 1, 2000 to December 31, 2000 $26,000,000 $10,000,000 provided, that the minimum amounts of Net Cash Revenues and Broadcast Cash Flow set forth above may be adjusted by Agent, in its discretion upon the purchase or sale of any material assets 17 or properties of Borrower, or the assignment to or from Borrower or any of its Subsidiaries of any FCC Authorizations. 4.6 Financial Statements and Other Reports. Borrower will maintain, and cause each of its Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in conformity with GAAP (it being understood that monthly financial statements are not required to have footnote disclosures). Borrower will deliver each of the financial statements and other reports and notices described below to Agent and Lenders. (A) Monthly Financials. As soon as available and in any event within forty-five (45) days after the end of each month, Borrower will deliver (1) the consolidated and consolidating balance sheets of Borrower and its Subsidiaries, as at the end of such month, and the related consolidated and consolidating statements of income, and stockholders' equity and cash flow for such month and for the period from the beginning of the then current fiscal year of Borrower to the end of such month (with, if applicable, comparable information at the close of and for the corresponding month of the prior fiscal year of Borrower and for the corresponding portion of such fiscal year and with comparable information set forth in the Borrower's budget), and (2) a projected sales or pacing report. (B) Accounts Receivable and Accounts Payable. As soon as available, and in any event within forty-five (45) days after the end of each fiscal quarter, or more often as may be reasonably requested by Agent, accounts receivable and accounts payable aging reports as of such quarter end or as of such other period as Agent may request. (C) Year-End Financials. As soon as available and in any event within one hundred twenty (120) days after the end of each fiscal year of Borrower, Borrower will deliver (1) the consolidated and consolidating balance sheets of Borrower and its Subsidiaries, as of the end of such year, and the related consolidated and consolidating statements of income, stockholders' equity and cash flow for such fiscal year, (with comparable information at the close of and for the prior fiscal year of Borrower), (2) a schedule of the outstanding Indebtedness for borrowed money of Borrower and its Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue and (3) a report with respect to the financial statements from a firm of Certified Public Accountants selected by Borrower and reasonably acceptable to Agent, which report shall be prepared in accordance with Statement of Auditing Standards No. 58 (the "Statement") entitled "Reports on Audited Financial Statements" and such report shall be "Unqualified" (as such term is defined in such Statement) and any other letters or reports delivered to management by such firm of Certified Public Accountants relating to such financial statements. (D) Compliance Certificate and Surplus Cash Flow Certificate. Together with each delivery of financial statements of Borrower and its Subsidiaries pursuant to subsection 4.6(C) above, Borrower will deliver a fully and properly completed Compliance Certificate (in substantially the same form as Exhibit 4.6(D)) signed by Borrower's chief executive officer or 18 chief financial officer. Together with each delivery of financial statements of Borrower and its Subsidiaries pursuant to subsection 4.6(C) above, Borrower will deliver a fully and properly completed Surplus Cash Flow Certificate (in substantially the same form as Exhibit 1.5(B)) signed by Borrower's chief executive officer or chief financial officer. (E) Accountants' Reports. Promptly upon receipt thereof, Borrower will deliver copies of all significant reports submitted by Borrower's firm of certified public accountants in connection with each annual, interim or special audit or review of any type of the financial statements or related internal control systems of Borrower made by such accountants, including any comment letter submitted by such accountants to management in connection with their services. (F) Annual Fiscal Budget. As soon as available and in any event no later than February 1 of each year, a budget of Borrower and its Subsidiaries for such fiscal year, on a month by month basis. (G) Tax Returns. As soon as available and in any event no later than fifteen (15) days after the filing of all federal income tax returns of Borrower, General Partner, any Limited Partner and Holdings, a copy of such tax returns. (H) Events of Default, Etc. Promptly upon any officer of Borrower obtaining knowledge of any of the following events or conditions, Borrower shall deliver notice thereof to Agent and Lenders, together with copies of all notices given or received by Borrower with respect to any such event or condition and a certificate of Borrower' chief executive officer specifying the nature and period of existence of such event or condition and what action Borrower have taken, are taking and propose to take with respect thereto: (1) any condition or event that constitutes an Event of Default or Default; (2) any notice that any Person has given to Borrower or any of its Subsidiaries or any other action taken with respect to a claimed default or event or condition of the type referred to in subsection 6.1(D); or (3) any event or condition that could reasonably be expected to result in any Material Adverse Effect. (I) Litigation. Promptly upon any officer of Borrower obtaining knowledge of (1) the institution of any action, suit, proceeding, governmental investigation or arbitration against or affecting any Loan Party or any property of any Loan Party not previously disclosed by a Borrower to Agent or (2) any material development in any action, suit, proceeding, governmental investigation or arbitration at any time pending against or affecting any Loan Party or any property of any Loan Party which, in each case, could be expected to have a Material Adverse Effect, Borrower will promptly give notice thereof to Agent and provide such other information as may be reasonably available to them to enable Agent and its counsel to evaluate such matter. (J) Supplemented Schedules; Notice of Corporate Changes. Annually, concurrently with Borrower' delivery of the budget required by subsection 4.6(F), Borrower shall supplement in writing and deliver revisions of the Schedules annexed to this Agreement to the extent necessary to disclose new or changed facts or circumstances after the Closing Date; 19 provided that subsequent disclosures shall not constitute a cure or waiver of any Default or Event of Default resulting from the matters disclosed. (K) FCC Notices. Promptly upon any officer or representative of a Loan Party or of a LMA Licensee receiving any notice from the FCC relating to the Stations, Borrower shall deliver, or shall cause to be delivered, notice thereof to Agent and Lenders, together with copies of any such notice received from the FCC. (L) Other Information. With reasonable promptness, Borrower will deliver such other information and data with respect to any Loan Party, any Subsidiary of any Loan Party, or any LMA Licensee, as from time to time may be reasonably requested by Agent. 4.7 Management Incentive. Provided no Default or Event of Default has occurred and is continuing and the current Annual Surplus Cash Flow Payment has been made, notwithstanding anything else contained herein or the other Loan Documents to the contrary, Borrower shall have the sole and absolute discretion to spend the Management Incentive for any proper partnership purpose, including compensation to Borrower's officers and employees, during the fiscal year immediately following the fiscal year in which such Management Incentive was earned. 4.8 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement. For purposes of this Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to such terms in conformity with GAAP. Financial statements and other information furnished to Agent pursuant to subsection 4.6 shall be prepared in accordance with GAAP as in effect at the time of such preparation. No "Accounting Changes" (as defined below) shall affect financial covenants, standards or terms in this Agreement; provided that Borrower shall prepare footnotes to each Compliance Certificate and the financial statements required to be delivered hereunder that show the differences between the financial statements delivered (which reflect such Accounting Changes) and the basis for calculating financial covenant compliance (without reflecting such Accounting Changes). "Accounting Changes" means: (a) changes in accounting principles required by GAAP and implemented by Borrower; (b) changes in accounting principles recommended by Borrower's certified public accountants and implemented by Borrower; and (c) changes in carrying value of Borrower's or any of its Subsidiaries' assets, liabilities or equity accounts resulting from (i) the application of purchase accounting principles (A.P.B. 16 and/or 17 and EITF 88-16 and FASB 109) to the Related Transactions or (ii) as the result of any other adjustments that, in each case, were applicable to, but not included in, the Pro Forma. SECTION 5 REPRESENTATIONS AND WARRANTIES In order to induce Agent and Lenders to enter into this Agreement, and to make the Loans, Borrower represents and warrants to Agent and each Lender that the following 20 statements are and, after giving effect to the Related Transactions, will be true, correct and complete: 5.1 Disclosure. No representation or warranty of any Loan Party contained in this Agreement, the financial statements referred to in subsection 5.5, the other Related Transactions Documents or any other document, certificate or written statement furnished to Agent or any Lender by or on behalf of any such Person for use in connection with the Loan Documents or the Related Transactions Documents contains any untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which the same were made. 5.2 No Material Adverse Effect. Since June 30, 1998, there have been no events or changes in facts or circumstances affecting any Loan Party which individually or in the aggregate have had or could be expected to have a Material Adverse Effect. 5.3 No Conflict. The execution, delivery and performance by the Loan Parties of the Related Transactions Documents to which they are parties and the consummation of the transactions contemplated thereby do not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to any Loan Party or any of its Subsidiaries, the partnership agreements, the certificate or articles of incorporation or bylaws or other organizational documents of any Loan Party or any of its Subsidiaries or any order, judgment or decree of any court or other agency of government binding on any Loan Party or any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any contract of any Loan Party or any of its Subsidiaries except to the extent any such breach or default would not individually or in the aggregate have a Material Adverse Effect, (iii) result in, or require the creation or imposition of, any Lien upon any of the properties or assets of any Loan Party or any of its Subsidiaries (other than any Liens created under of the Loan Documents in favor of the Agent on behalf of the Lenders, or (iv) require any approval of stockholders or any approval or consent of any Person under any contract of any Loan Party or any of its Subsidiaries, except for such approvals or consents which will be obtained on or before the Closing Date and disclosed on Schedule 5.3 and with respect to any consents required under any contracts, the failure to obtain such consents would not individually or in the aggregate have a Material Adverse Effect. 5.4 Organization, Powers, Capitalization and Good Standing. (A) Organization and Powers. Borrower is a limited partnership duly formed, validly existing and in good standing under the laws of its jurisdiction of formation (which jurisdiction is set forth on Schedule 5.4(A)). Each of the Loan Parties has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and proposed to be conducted, to enter into each Related Transactions Document to which it is a party and to carry out the Related Transactions. 21 (B) Capitalization. The partnership interests of Borrower are as set forth on Schedule 5.4(B). All partnership interests of Borrower are duly authorized and validly issued, fully paid, nonassessable, free and clear of all Liens other than those in favor of Agent, for the benefit of Agent and Lenders, and such partnership interests were issued in compliance with all applicable state and federal laws concerning the issuance of partnership interests. The capital stock of General Partner and the Limited Partners is owned by the stockholders and in the amounts set forth on Schedule 5.4(B). Except as otherwise described in Schedule 5.4(B), there are no preemptive or other outstanding rights, options, warrants, conversion rights or similar agreements or understandings for the purchase or acquisition from Borrower, of any partnership interests or other ownership of such Persons. (C) Binding Obligation. This Agreement is, and the other Related Transactions Documents when executed and delivered will be, the legally valid and binding obligations of the applicable parties thereto, each enforceable against each of such parties, as applicable, in accordance with their respective terms. (D) Qualification. Each of Borrower and each of its Subsidiaries is duly qualified and in good standing wherever necessary to carry on its respective business and operations, except for such jurisdictions in which the failure to be qualified and in good standing could not reasonably be expected to have a Material Adverse Effect. All jurisdictions in which Borrower and each of its Subsidiaries is qualified to do business are set forth on Schedule 5.4(D). 5.5 Financial Statements. All financial statements concerning Borrower which have been or will hereafter be furnished to Agent and Lenders pursuant to this Agreement, including those listed below, have been or will be prepared in accordance with GAAP consistently applied (except as disclosed therein) and do or will present fairly the financial condition of the Persons covered thereby as at the dates thereof and the results of their operations for the periods then ended. (A) The audited consolidated balance sheets at December 31, 1997 and the related statement of income of Borrower and its Subsidiaries, for the fiscal year then ended, certified by Grant Thornton LLP as having been prepared in accordance with Statement of Auditing Standards No. 58 entitled Reports on Audited Financial Statements and any letters to management related thereto. (B) The consolidated balance sheet at June 30, 1998 and the related statement of income of Borrower and its Subsidiaries for the six (6) months then ended. 5.6 Intellectual Property. Borrower and each of its Subsidiaries owns, is licensed to use or otherwise has the right to use, all patents, trademarks, trade names, copyrights, technology, know-how and processes used in or necessary for the conduct of its business as currently conducted that are material to the condition (financial or other), business or operations of Borrower or its Subsidiaries (collectively called "Intellectual Property") and all such Intellectual Property is identified on Schedule 5.6 and fully protected and/or duly and properly registered, filed or issued in the appropriate office and jurisdictions for such registrations, filings or issuances. 22 Except as disclosed in Schedule 5.6, the use of such Intellectual Property by Borrower and its Subsidiaries does not and has not been alleged by any Person to infringe on the rights of any Person. 5.7 Litigation: Adverse Facts. There are no actions, suits, proceedings, arbitrations or governmental investigations (whether or not purportedly on behalf of any Loan Party or any of its Subsidiaries) at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign (including any environmental claims) that are pending or, to the knowledge of Borrower, threatened against or affecting any Loan Party or any of its Subsidiaries or any property of any Loan Party or any of its Subsidiaries and that, individually or in the aggregate, could be expected to result in a Material Adverse Effect. No Loan Party nor any of its Subsidiaries (i) is in violation of any applicable laws (including environmental laws) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, or (ii) is subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any court or any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, that, individually or in the aggregate, could be expected to result in a Material Adverse Effect. 5.8 Employee Matters. Except as set forth on Schedule 5.8, (a) no Loan Party nor any of their respective employees is subject to any collective bargaining agreement, (b) no petition for certification or union election is pending with respect to the employees of any Loan Party and no union or collective bargaining unit has sought such certification or recognition with respect to the employees of any Loan Party and (c) there are no strikes, slowdowns, work stoppages or controversies pending or, to the best knowledge of Borrower after due inquiry, threatened between any Loan Party and its respective employees, other than employee grievances arising in the ordinary course of business which could not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. Except as set forth on Schedule 5.8, neither Borrower nor any of its Subsidiaries is party to an employment contract. 5.9 Solvency. Borrower: (a) owns and will own assets the fair saleable value of which are (i) greater than the total amount of liabilities (including contingent liabilities) of Borrower and (ii) greater than the amount that will be required to pay the probable liabilities of Borrower's then existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to Borrower; (b) have capital that is not unreasonably small in relation to their business as presently conducted or after giving effect to any contemplated transaction; and (c) do not intend to incur and do not believe that they will incur debts beyond their ability to pay such debts as they become due. 5.10 FCC Matters. 5.10.1 Borrower Stations. (a) Schedule 5.10.1 hereto contains a complete list of all FCC Authorizations of Borrower. Such list correctly sets forth the termination date of each such FCC 23 Authorization. Each such FCC Authorization that is materially necessary to the operation of the business of any Borrower Station is validly issued and in full force and effect, and constitutes in all material respects, all of the authorizations from the FCC necessary under the Communications Act for the operation of such Borrower's business (including, without limitation, the Borrower Stations) in the same manner as it is presently conducted and as proposed to be conducted. Borrower has taken all actions and performed all of its obligations that are necessary to maintain such FCC Authorizations for the Borrower Stations without adverse modification or impairment, and complete and correct copies of the FCC Authorizations of each Borrower Station have been delivered to Agent and Lenders. Except as expressly set forth on Schedule 5.10.1, no event has occurred which (i) results in, or after notice or lapse of time or both would result in, revocation, suspension, adverse modification, non renewal, impairment or termination of or any order of forfeiture with respect to, any FCC Authorization for a Borrower Station, or (ii) materially and adversely affects or in the future may (so far as Borrower can now reasonably foresee) materially adversely affect any of the rights of Borrower thereunder. No condition has been imposed by the FCC as part of any of the FCC Authorizations for the Borrower Stations or on the grant of the renewal for such FCC Authorizations, which is not set forth on the face thereof as issued by the FCC or contained in the rules and regulations of the FCC applicable generally to the stations of the type, nature, class or location of the Borrower Stations. (b) Except as expressly set forth in Schedule 5.10.1, Borrower is not a party to and has no knowledge of any investigation, notice of apparent liability, violation, forfeiture or other order or complaint issued by or before any court or regulatory body, including the FCC, or of any other proceedings (other than proceedings relating to the radio industry generally) which could in any manner threaten or adversely affect the validity or continued effectiveness of the FCC Authorizations for any Borrower Station. Borrower has no reason to believe (other than in connection with there being no legal assurance thereof) that the FCC Authorizations for the Borrower Stations listed and described in Schedule 5.10.1 will not be renewed in the ordinary course. Borrower has filed in a timely manner all material reports, applications, documents, instruments and information required to be filed by it pursuant to applicable rules and regulations or requests of every regulatory body having jurisdiction over any of its FCC Authorizations for a Borrower Station. (c) Except as expressly set forth in Schedule 5.10.1, none of the facilities used in connection with Borrower's radio broadcasting operations (including without limitation, the transmitter and tower sites owned or used by Borrower in connection with the operation of the Borrower Stations) violates in any material respect the provisions of any applicable building codes, fire regulations, building restrictions or other governmental ordinances, orders, or regulations and each such facility is zoned so as to permit the commercial uses intended by the owner or occupier thereof and there are no outstanding variances or special use permits materially affecting any of the facilities or the uses thereof. (d) Except as expressly set forth in Schedule 5.10.1, each Ownership Report filed by Borrower with the FCC is true, correct and complete in all material respects and there have been no changes in the ownership of Borrower since the filing of the most recent Ownership Reports for the Borrower Stations. 24 (e) The execution, delivery and performance of the Related Transactions Documents by Borrower do not require the approval of the FCC. The execution, delivery and performance of the Related Transactions Documents will not result in any violation of the Communications Act, and will not cause any forfeiture or impairment of any of the FCC Authorizations issued for the operation of any of the Borrower Stations. 5.10.2 LMA Stations. (a) The LMA Agreements are in full force and effect and are in compliance in all material respects with the Communications Act. (b) To the best of Borrower's knowledge after due inquiry: Schedule 5.10.2 hereto contains a complete listing of all FCC Authorizations held by each LMA Licensee for its LMA Stations; these FCC Authorizations constitute all licenses, construction permits, and authorizations required under the Communications Act to permit each LMA Licensee to own, control, manage and operate its LMA Stations as they are currently being owned, controlled, managed and operated; Schedule 5.10.2 correctly sets forth the termination date of each such FCC Authorization; each such FCC Authorization that is materially necessary to the operation of the business of each LMA Licensee is validly issued and in full force and effect, and constitutes in all material respects, all of the authorizations from the FCC necessary for the operation of the LMA Licensee's business with respect to its LMA Stations in the same manner as they presently are being conducted and as they are proposed to be conducted; each LMA Licensee has taken all actions and performed all of its obligations that are necessary to maintain such FCC Authorizations without adverse modification or impairment, and complete and correct copies of the FCC Authorizations of each LMA Licensee have been delivered to Agent and Lenders; except as expressly set forth on Schedule 5.10.2, no event has occurred which (i) results in, or after notice or lapse of time or both would result in, revocation, suspension, adverse modification, non renewal, impairment or termination of or any order of forfeiture with respect to, any FCC Authorization for any LMA Station or (ii) materially and adversely affects or in the future may (so far as now can reasonably be foreseen) materially adversely affect any of the rights of any LMA Licensee thereunder; and no condition has been imposed by the FCC as part of any of the FCC Authorizations for any LMA Station, or on the grant of the renewal for such FCC Authorizations, which is not set forth on the face thereof as issued by the FCC or contained in the rules and regulations of the FCC applicable generally to stations of the type, nature, class or location of the LMA Stations. (c) To the best of Borrower's knowledge after due inquiry: except as expressly set forth in Schedule 5.10.2, no LMA Licensee is a party to any investigation, notice of apparent liability, violation, forfeiture or other order or complaint issued by or before any court or regulatory body, including the FCC, or of any other proceedings (other than proceedings relating to the radio industry generally) which could in any manner threaten or adversely affect the validity or continued effectiveness of its FCC Authorizations; the FCC has granted renewals of the FCC Authorizations for each LMA Station in the ordinary course; and each LMA Licensee has filed in a timely manner all material reports, applications, documents, instruments and information 25 required to be filed by it pursuant to applicable rules and regulations or requests of every regulatory body having jurisdiction over any of its FCC Authorizations. (d) To the best of Borrower's knowledge after due inquiry: except as expressly set forth in Schedule 5.10.2, none of the facilities used in connection with any LMA Licensee's radio broadcasting operations that such LMA Licensee owns or uses in connection with the operation of its LMA Station, violates in any material respect the provisions of any applicable building codes, fire regulations, building restrictions or other governmental ordinances, orders, or regulations and each such facility is zoned so as to permit the commercial uses intended by the owner or occupier thereof and there are no outstanding variances or special use permits materially affecting any of the facilities or the uses thereof. (e) To the best of Borrower's knowledge after due inquiry: each Ownership Report filed by each LMA Licensee with the FCC is true, correct and complete in all material respects and there have been no changes in such LMA Licensee's ownership since the filing of the most recent Ownership Reports for the LMA Stations of such LMA Licensee. (f) To the best of Borrower's knowledge after due inquiry: the execution, delivery and performance of the Related Transactions Documents in accordance with their terms will not result in any violation of the Communications Act, and will not cause any forfeiture or impairment of any of the FCC Authorizations issued for the operation of any LMA Station. 5.11 Title to Properties; Liens: Real Property. (A) Title to Properties; Liens. Borrower and its Subsidiaries each have (i) good, sufficient and legal title to (in the case of fee interests in real property), (ii) valid leasehold interests in (in the case of leasehold interests in real or personal property), or (iii) good title to (in the case of all other personal property), all of their respective properties and assets reflected in the financial statements referred to in Section 5.5. Except as permitted by this Agreement, all such properties and assets are free and clear of Liens. (B) Real Property. As of the Closing Date, Schedule 5.11 annexed hereto contains a true, accurate and complete list of (i) all fee properties and (ii) all leases, subleases or assignments of leases (together with all amendments, modifications, supplements, renewals or extensions of any thereof) affecting the real property of Borrower or any of its Subsidiaries, regardless of whether such Loan Party is the landlord or tenant (whether directly or as an assignee or successor in interest) under such lease, sublease or assignment. 5.12 Payment of Taxes. All tax returns and reports of Borrower and its Subsidiaries required to be filed by any of them have been timely filed, and all taxes shown on such tax returns to be due and payable and all assessments, fees and other governmental charges upon Borrower and its Subsidiaries and upon their respective properties, assets, income, businesses and franchises which are due and payable have been paid when due and payable. Borrower knows of no proposed tax assessment against Borrower or any of its Subsidiaries which 26 is not being actively contested by such Loan Party or such Subsidiary in good faith and by appropriate proceedings; provided that such reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor. 5.13 Governmental Regulation. No Loan Party nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 or under any other federal or state statute or regulation which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable. 5.14 Certain Fees. No broker's or finder's fee or commission will be payable with respect to this Agreement or any of the transactions contemplated hereby except as set forth on subschedule 3 of Schedule 7.1 and Borrower hereby indemnifies Lenders against, and agrees that it will hold Lenders harmless from, any claim, demand or liability for any such broker's or finder's fees alleged to have been incurred in connection herewith or therewith and any expenses (including reasonable fees, expenses and disbursements of counsel) arising in connection with any such claim, demand or liability. SECTION 6 DEFAULT, RIGHTS AND REMEDIES 6.1 Event of Default. "Event of Default" shall mean the occurrence or existence of any one or more of the following: (A) Interest and Fees. Failure to pay when due any interest on the Loans or any other amount due under this Agreement or any of the other Loan Documents and the continuation of such failure for a period of sixty (60) days after the due date thereof; or (B) Payments. Failure to pay when due any Annual Surplus Cash Flow Payment and the continuation of such failure for a period of thirty (30) days after the due date thereof; or (C) Termination Payment. Failure to pay the principal of the Loans on or before the Termination Date; or (D) Default in Other Agreements. (1) Failure of Borrower or any of its Subsidiaries to pay when due or within any applicable grace period any principal or interest on Indebtedness (other than the Loans and the Investor Indebtedness) or any Contingent Obligations; (2) any breach or default of any Loan Party with respect to the Investor Indebtedness; (3) breach or default of Borrower or any of its Subsidiaries with respect to any Indebtedness (other than the Loans and the Investor Indebtedness) or any Contingent Obligations, if the effect of such breach or default is to cause or to permit the holder or holders then to cause, Indebtedness and/or Contingent Obligations having an individual principal amount in excess of $25,000 or having an 27 aggregate principal amount in excess of $25,000 to become or be declared due prior to their stated maturity; or (4) breach or default by any party to any LMA Agreement if the effect of such breach or default is to cause or to permit any party to terminate or seek the termination of such LMA Agreement; or (E) Breach of Certain Provisions. Failure of Borrower to perform or comply with any term or condition contained in that portion of subsection 2.3 relating to inspections and Lender meetings, Section 3 or subsection 4.5 relating to Borrower's obligation to maintain minimum levels of Net Cash Revenues and Broadcast Cash Flow; or (F) Breach of Warranty. Any representation, warranty, certification or other statement made by any Loan Party in any Loan Document or in any statement or certificate at any time given by such Person in writing pursuant or in connection with the Loan Document is false in any material respect on the date made; or (G) Involuntary Bankruptcy; Appointment of Receiver, Etc. (1) A court enters a decree or order for relief with respect to Borrower or any of its Subsidiaries in an involuntary case under the Bankruptcy Code, which decree or order is not stayed or other similar relief is not granted under any applicable federal or state law; or (2) the continuance of any of the following events for thirty (30) days unless dismissed, bonded or discharged: (a) an involuntary case is commenced against Borrower or any of its Subsidiaries, under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect; or (b) a decree or order of a court for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Borrower or any of its Subsidiaries, or over all or a substantial part of its property, is entered; or (c) an interim receiver, trustee or other custodian is appointed without the consent of Borrower or any of its Subsidiaries, for all or a substantial part of the property of Borrower or any such Subsidiary; or (H) Voluntary Bankruptcy; Appointment of Receiver, Etc. (1) An order for relief is entered with respect to Borrower or any of its Subsidiaries or Borrower or any of its Subsidiaries commences a voluntary case under the Bankruptcy Code, or consents to the entry of an order for relief in an involuntary case or to the conversion of an involuntary case to a voluntary case under any such law or consents to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or (2) Borrower or any of its Subsidiaries makes any assignment for the benefit of creditors; or (3) the Board of Directors of Borrower or any of its Subsidiaries adopts any resolution or otherwise authorizes action to approve any of the actions referred to in this subsection 6.1(H); or (I) Other Defaults Under Loan Documents. Any Borrower or any other Loan Party defaults in the performance of or compliance with any term contained in this Agreement or the other Loan Documents, including subsection 2.2 relating to Borrower's obligation to maintain insurance, subsection 4.4 relating to Borrower's obligation to maintain a minimum level of Net Working Capital and subsection 4.6 relating to Borrower's obligation to deliver financial statements, and such default is not remedied or waived within thirty (30) days (other than 28 occurrences described in other provisions of this subsection 6.1 for which a different grace or cure period is specified or which constitute immediate Events of Default); or (J) Governmental Liens. Any lien, levy or assessment is filed or recorded with respect to or otherwise imposed upon all or any part of the Collateral (including, to the extent permitted by law, any FCC Authorization) or the assets of Borrower or any of its Subsidiaries by the United States or any department or instrumentality thereof or by any state, county, municipality or other governmental agency (other than Permitted Encumbrances); or (K) Judgment and Attachments. Any money judgment, writ or warrant of attachment, or similar process involving (1) an amount in any individual case in excess of $25,000 or (2) an amount in the aggregate at any time in excess of $25,000 (in either case not adequately covered by insurance as to which the insurance company has acknowledged coverage) is entered or filed against Borrower or any of its Subsidiaries or any of their respective assets and remains undischarged, unvacated, unbonded or unstayed for a period of thirty (30) days or in any event later than five (5) Business Days prior to the date of any proposed sale thereunder; or (L) Dissolution. Any order, judgment or decree is entered against Borrower or any of its Subsidiaries decreeing the dissolution or split up of such Borrower or Subsidiary and such order remains undischarged or unstayed for a period in excess of fifteen (15) days; or (M) Solvency. Any Borrower ceases to be solvent (as represented by Borrower in subsection 5.9) or admits in writing its present or prospective inability to pay its debts as they become due; or (N) Injunction. Borrower or any of its Subsidiaries are enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency from conducting all or any material part of their business and such order continues for more than fifteen (15) days; or (O) ERISA; Pension Plans. (1) Borrower or any of its Subsidiaries fails to make full payment when due of all amounts which, under the provisions of any employee benefit plans or any applicable provisions of the IRC, any such Person is required to pay as contributions thereto and such failure results in or is likely to result in a Material Adverse Effect; or (2) an accumulated funding deficiency in excess of $25,000 occurs or exists, whether or not waived, with respect to any such employee benefit plans; or (3) any employee benefit plan loses its status as a qualified plan under the IRC which results in or could be expected to result in a Material Adverse Effect; or (P) Environmental Matters. Borrower or any of its Subsidiaries fails to: obtain or maintain any operating licenses or permits required by environmental authorities; begin, continue or complete any remediation activities as required by any environmental authorities; store or dispose of any hazardous materials in accordance with applicable environmental laws and regulations; or comply with any other environmental laws; if such failure has or could be expected to have a Material Adverse Effect; or 29 (Q) Invalidity of Loan Documents. Any of the Loan Documents for any reason, other than a partial or full release in accordance with the terms thereof, ceases to be in full force and effect or is declared to be null and void, or any Loan Party denies that it has any further liability under the Loan Documents to which it is a party, or gives notice to such effect; or (R) Damage; Strike: Casualty. Any material damage to, or loss, theft or destruction of, any Collateral, whether or not insured, or any strike, lockout, labor dispute, embargo, condemnation, act of God or public enemy, or other casualty which causes, the cessation or substantial curtailment of revenue producing activities at any facility of Borrower or any of its Subsidiaries if any such event or circumstance could reasonably be expected to have a Material Adverse Effect; or (S) Failure of Security. Agent, for the benefit of Agent and Lenders, does not have or ceases to have a valid and perfected first priority security interest in the Collateral (subject to Permitted Encumbrances) or any substantial portion thereof, in each case, for any reason other than the failure of Agent or Lenders to take, or omit to take, any action within its control; or (T) Business Activities. Borrower engages in any type of business activity other than as permitted in Section 3.9; or (U) CEO. Michael S. Libretti (a) ceases to be employed as the Chief Financial Officer of Borrower, or (b) is declared incompetent by a court of appropriate jurisdiction, or (c) suffers a Disability and any such condition described in the foregoing clauses (a), (b) or (c) shall exist for a period of one hundred and eighty (180) days; or (V) FCC Authorization. Any FCC Authorization is revoked, suspended, canceled or otherwise rendered non-transferable or non-assignable by the FCC or any other regulatory agency or court of competent jurisdiction after all applicable appeals of such decision, determination or order to revoke, suspend or cancel the FCC Authorization have been finally determined or the applicable appeal periods have expired, if one or more appeals have not been taken; or (W) Broadcast Signal. Any Station, for any reason other than a natural disaster or act of war, ceases to broadcast in the normal and usual manner at its fully licensed parameters for any period of 120 consecutive hours or longer or for 120 hours or more in any fifteen (15) day period; or (X) Tower Site Lapse. Any tower site lease for any Station lapses without renewal on terms and conditions reasonably satisfactory to Agent or any such lease is otherwise terminated for any reason and such lapse or termination continues without a replacement acceptable to Agent for a period of thirty (30) days; or (Y) Material Adverse Effect. Any event or change (other than an event or change which results in an Event of Default under any of the foregoing clauses (A) through (X) of 30 this Section 6.1) shall occur that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect. 6.2 Acceleration and Suspension of Commitments. (A) Upon the occurrence of any Event of Default described in the foregoing subsections 6.1(G) or 6.1(H), the unpaid principal amount of and accrued interest (including any default interest) and fees, and the Fixed Rate Breakage Fee, if any, on the Loans and all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other requirements of any kind, all of which are hereby expressly waived by Borrower. Upon the occurrence and during the continuance of any other Event of Default, Agent may, by written notice to Borrower declare all or any portion of the Loans and all or some of the other Obligations to be, and the same shall forthwith become, immediately due and payable together with accrued interest thereon. (B) Upon the occurrence of any Default or Event of Default, Agent and each Lender without notice or demand, may immediately cease making additional Term B Loans and cause its obligation to lend its Pro Rata Share of the Term B Loan Commitment to be suspended; provided that, in the case of a Default, if the subject condition or event is waived, cured or removed by Agent within any applicable grace or cure period, any suspended portion of the Term B Loan Commitment shall be reinstated. 6.3 Remedies. (A) Upon the occurrence of any Event of Default pursuant to Sections 6.1(A), 6.1(B) or 6.1(C), if any, Borrower shall (consistent with Section 9.19 hereof), at Agent's option: (i) stipulate to the appointment of a receiver in a court of competent jurisdiction; and (ii) in the event of such appointment, consent to and cooperate with the liquidation of the Stations and all Collateral for the payment of the Obligations under the Loans by the receiver; or (iii) consent to and cooperate with such other non-judicial foreclosure proceedings conducted or initiated by Agent. (B) Upon the occurrence of any Event of Default, Agent and Lenders shall have all remedies set forth in the Loan Documents and all remedies at law, in equity, or under the Uniform Commercial Code that are consistent with the Communications Act. 6.4 Performance by Agent. If Borrower shall fail to perform any covenant, duty or agreement contained in any of the Loan Documents, Agent may, to the extent consistent with the Communications Act, perform or attempt to perform such covenant, duty or agreement on behalf of Borrower after the expiration of any cure or grace periods set forth herein. In such event, Borrower shall, at the request of Agent, promptly pay any amount reasonably expended by 31 Agent in such performance or attempted performance to Agent, together with interest thereon at the highest rate of interest in effect upon the occurrence of an Event of Default as specified in subsection 1.2(A) from the date of such expenditure until paid. Notwithstanding the foregoing, it is expressly agreed that Agent shall not have any liability or responsibility for the performance of any obligation of Borrower under this Agreement or any other Loan Document. SECTION 7 CONDITIONS TO LOANS The obligation of the Lenders to make the Loans is subject to satisfaction of all of the applicable conditions set forth below. 7.1 Conditions to Initial Loans. The obligation of Lenders to make the Loans on the Closing Date is subject to the following conditions: (a) the delivery of all documents listed on Schedule 7.1, all in form and substance satisfactory to Agent; (b) all of the Related Transactions shall have been consummated in accordance with the Related Transaction Documents; (c) Borrower shall pay all fees as required by Section 1.3 and the fees specified in subschedule (3) of Schedule 7.1; (d) Borrower's assets shall have a fair market value of not less than $125,000,000 as determined by an appraisal in form and substance acceptable to Agent and performed by a Person acceptable to Agent; (e) Borrower shall have Net Cash Revenues of at least $10,000,000 for the period from January 1, 1998 through June 30, 1998; (f) Borrower shall have Broadcast Cash Flow of at least $2,900,000 for the period from January 1, 1998 through June 30, 1998; and (g) Borrower shall have Net Working Capital of at least $2,250,000 as of the Closing Date. 7.2 Conditions to All Loans. The obligations of Lenders to make Loans on any date ("Funding Date") are subject to the further conditions precedent set forth below. (A) Agent shall have received, in accordance with the provisions of subsection 1.1, a notice requesting an advance of a Term B Loans. 32 (B) The representations and warranties contained in Section 5 of this Agreement and elsewhere herein and in the Loan Documents shall be (and each request by Borrower for a Loan shall constitute a representation and warranty by Borrower that such representations and warranties are) true, correct and complete in all material respects on and as of that Funding Date to the same extent as though made on and as of that date, except for any representation or warranty limited by its terms to a specific date and taking into account any amendments to the Schedules or Exhibits as a result of any disclosures made in writing by Borrower to Agent after the Closing Date and approved by Agent in writing. (C) No event shall have occurred and be continuing or would result from the consummation of the borrowing contemplated that would constitute an Event of Default or a Default. (D) No order, judgment or decree of any court, arbitrator or governmental authority shall purport to enjoin or restrain any Lender from making any Loan. SECTION 8 LENDER AGREEMENTS 8.1 Assignments and Participations in the Loans and Notes. Each Lender (including AMRESCO) may assign, subject to the terms of a Lender Addition Agreement and applicable law, its rights and delegate its obligations under this Agreement to another Person, provided that (a) such Lender (excluding AMRESCO) shall first obtain the written consent of Agent; (b) the Pro Rata Share of the Term B Loan Commitment and Term A Loan being assigned shall in no event be less than the lesser of (i) $5,000,000 and (ii) the entire amount of the Pro Rata Share of the Loans of the assigning Lender; (c) such other Person is not a direct competitor of Borrower who owns and/or operates radio stations in any of the markets covered by the Stations, and (d) upon the consummation of each such assignment the assigning Lender shall pay Agent an administrative fee of $2,500. The administrative fee referred to in clause (c) of the preceding sentence shall not apply to an assignment from a Lender to an affiliate of such Lender. In the case of an assignment authorized under this subsection 8.1, the assignee shall have, to the extent of such assignment, the same rights, benefits and obligations as it would if it were an initial Lender hereunder. Effective from and after any such assignment, the assigning Lender shall be relieved of its obligations from and after assignment hereunder with respect to its Pro Rata Share of the Term B Loan Commitment or assigned portion thereof. Borrower hereby acknowledges and agrees that any assignment will give rise to a direct obligation of Borrower to the assignee and that the assignee shall be considered to be a "Lender." Each Lender (including AMRESCO) may sell participations in all or any part of its Pro Rata Share of the Term B Loan Commitment and Term A Loan to another Person, provided that all amounts payable by Borrower hereunder shall be determined as if that Lender had not sold such participation and the holder of any such participation shall not have any rights or obligations under the Loan Documents, shall not be entitled to require Agent to take or omit to take any 33 action thereunder and must act solely through the Lender that sold such participation with respect to Borrower, Agent and the Loan Documents. Lenders hereby acknowledge and agree that any participation will not give rise to a direct obligation of Borrower to the participant, and the participant shall not for any purpose hereof be considered to be a "Lender," but instead must act solely through the Lender selling the participation. Except as otherwise provided in this subsection 8.1 no Lender shall, as between Borrower and that Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment, transfer or negotiation of, or granting of a participation in, all or any part of the Loans, the Notes or other Obligations owed to such Lender. Each Lender may furnish any information concerning Borrower and its Affiliates in the possession of that Lender from time to time to assignees and participants (including prospective assignees and participants). Borrower agrees that it will use its best efforts to assist and cooperate with Agent and any Lender in any manner reasonably requested by Agent or such Lender to effect the sale of a participation or an assignment described above, including without limitation assistance in the preparation of appropriate disclosure documents or placement memoranda. Agent shall provide Borrower with written notice of the name and address of any new Lender after the date hereof. 8.2 Agent. (A) Appointment. Each Lender hereby designates and appoints Agent as its agent under this Agreement and the other Loan Documents, and each Lender hereby irrevocably authorizes Agent to take such action or to refrain from taking such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers as are set forth herein or therein, together with such other powers as are reasonably incidental thereto. Agent is authorized and empowered to amend, modify, or waive any provisions of this Agreement or the other Loan Documents on behalf of Lenders, subject to the requirements, if any, set forth in any Lender Addition Agreement. Agent agrees to act as such on the express conditions contained in this subsection 8.2. The provisions of this subsection 8.2 are solely for the benefit of Agent and Lenders. Neither Borrower nor any Loan Party shall have any rights as a third party beneficiary of any of the provisions hereof, other than the fact that Borrower and the other Loan Parties may rely on Agent's authority to act on behalf of Lenders as provided hereinabove. In performing its functions and duties under this Agreement, Agent shall act solely as agent of Lenders and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for Borrower or any other Loan Party. Agent may perform any of its duties hereunder, or under the Loan Documents, by or through its agents or employees. (B) Nature of Duties. The duties of Agent shall be mechanical and administrative in nature. Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Lender. Nothing in this Agreement or any of the Loan Documents, express or implied, is intended to or shall be construed to impose upon Agent any obligations in respect of this Agreement or any of the Loan Documents except as expressly set forth herein or therein. 34 Each Lender shall make its own independent investigation of the financial condition and affairs of Borrower in connection with the extension of credit hereunder and shall make its own appraisal of the creditworthiness of Borrower, and Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto (other than as expressly required herein). (C) Rights, Exculpation, Etc. Neither Agent nor any of its officers, directors, employees or agents shall be liable to any Lender for any action taken or omitted by them hereunder or under any of the Loan Documents, or in connection herewith or therewith, except that Agent shall be liable with respect to its own gross negligence or willful misconduct. Agent shall not be liable for any apportionment or distribution of payments made by it in good faith and if any such apportionment or distribution is subsequently determined to have been made in error the sole recourse of any Lender to whom payment was due but not made, shall be to recover from other Lenders any payment in excess of the amount to which they are determined to be entitled (and such other Lenders hereby agree to return to such Lender any such erroneous payments received by them). In performing its functions and duties hereunder, Agent shall exercise the same care which it would in dealing with loans for its own account, but Agent shall not be responsible to any Lender for any recitals, statements, representations or warranties herein or for the execution, effectiveness, genuineness, validity, enforceability, collectibility, or sufficiency of this Agreement or any of the Loan Documents or the transactions contemplated thereby, or for the financial condition of any Loan Party. Agent shall not be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any of the Loan Documents or the financial condition of any Loan Party, or the existence or possible existence of any Default or Event of Default. Agent may at any time request instructions from Lenders with respect to any actions or approvals which by the terms of this Agreement, any Lender Addition Agreement or of any of the Loan Documents Agent is permitted or required to take or to grant, and if such instructions are promptly requested, Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval and shall not be under any liability whatsoever to any Person for refraining from any action or withholding any approval under any of the Loan Documents until it shall have received such instructions from the Lender, if there is only one Lender or that portion or number of Lenders as may, from time to time be specified in any Lender Addition Agreement if there is more than one Lender. Without limiting the foregoing, no Lender shall have any right of action whatsoever against Agent as a result of Agent acting or refraining from acting under this Agreement, the Notes, or any of the other Loan Documents in accordance with the instructions of the Lender, if there is only one Lender and from that portion or number of the Lenders as may be from time to time specified in any Lender Addition Agreement if there is more than one Lender. (D) Reliance. Agent shall be entitled to rely, and shall be fully protected in relying, upon any written or oral notices, statements, certificates, orders or other documents or any telephone message or other communication (including any writing, telex, telecopy or telegram) believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person, and with respect to all matters pertaining to this Agreement or any of the Loan Documents and its duties hereunder or thereunder, upon advice of counsel selected by it. 35 Agent shall be entitled to rely upon the advice of legal counsel, independent accountants, and other experts selected by Agent in its sole discretion. (E) Indemnification. Each Lender, in proportion to its Pro Rata Share, will reimburse and indemnify Agent, to the extent Agent shall not have been reimbursed by Borrower, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including, without limitation, attorneys' fees and expenses), advances or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against Agent in any way relating to or arising out of this Agreement or any of the Loan Documents or any action taken or omitted by Agent under or related to this Agreement or any of the Loan Documents; provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, advances or disbursements resulting from Agent's gross negligence or willful misconduct. If any indemnity furnished to Agent for any purpose shall, in the opinion of Agent, be insufficient or become impaired, Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. The obligations of Lenders under this subsection 8.2(E) shall survive the payment in full of the Obligations, the termination of this Agreement and any exercise of remedies pursuant to the Loan Documents. (F) AMRESCO Individually. With respect to its obligations under the Term B Loan Commitment, the Loans made by it and the Notes issued to it, AMRESCO shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender. The term "Lenders" or any similar terms shall, unless the context clearly otherwise indicates, include AMRESCO in its individual capacity as a Lender. AMRESCO may lend money to, acquire equity or other ownership interests in, and generally engage in any kind of banking, trust or other business with any Loan Party as if it were not acting as Agent pursuant hereto. (G) Successor Agent. (1) Resignation. Agent may resign from the performance of all its agency functions and duties hereunder at any time by giving at least thirty (30) Business Days' prior written notice to Borrower and the Lenders. Such resignation shall take effect upon the acceptance by a successor Agent of appointment pursuant to clause (2) below or as otherwise provided below. (2) Appointment of Successor. Upon any such notice of resignation pursuant to clause (1) above, Lender if there is only one Lender or that portion or number of Lenders as may from time to time be specified in any Lender Addition Agreement if there is more than one Lender shall appoint a successor Agent. If a successor Agent shall not have been so appointed within the thirty (30) Business Day period, referred to in clause (1) above, the retiring Agent shall then appoint a successor Agent who shall serve as Agent until such time, if any, as such Lenders appoint a successor Agent as provided above. 36 (3) Successor Agent. Upon the acceptance of any appointment as Agent under the Loan Documents by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Loan Documents. After any retiring Agent's resignation as Agent under the Loan Documents, the provisions of this subsection 8.2 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under the Loan Documents. (4) Compliance with Communications Act. Any change in Agent must be made in a manner that complies with the Communications Act to the extent applicable. (H) Collateral Matters. (1) Release of Collateral. Lenders hereby irrevocably authorize Agent, at its option and in its discretion, to release any Lien granted to or held by Agent upon any property covered by the Security Documents (i) upon payment and satisfaction of all Obligations (other than inchoate indemnification Obligations with respect to claims, losses or liabilities which have not yet been asserted) and termination of the Term B Loan Commitment; (ii) constituting property being sold or disposed of if Borrower certifies to Agent that the sale or disposition is expressly permitted under Section 3.7 and setting forth in reasonable detail the assets sold and the fair market value thereof (and Agent may rely in good faith conclusively on any such certificate, without further inquiry); (iii) constituting property leased to Borrower under a lease which has expired or been terminated in a transaction permitted under this Agreement or is about to expire and which has not been, and is not intended by Borrower to be, renewed or extended; or (iv) in accordance with the provisions of the succeeding sentence. Agent may release or compromise any Collateral and the proceeds thereof, either in a single transaction or in a series of related transactions, with the consent of Lender if there is only one Lender and if there is more than one Lender, Lenders owning the percentage of the Term B Loan Commitment and the outstanding Term A Loan as may from time to time be specified in any Lender Addition Agreement. (2) Confirmation of Authority; Execution of Releases. Without in any manner limiting Agent's authority to act without any specific or further authorization or consent by Lenders (as set forth in subsection 8.2(H)(1)), each Lender agrees to confirm in writing, upon request by Agent or Borrower, the authority to release any property covered by the Security Documents conferred upon Agent under clauses (i) through (iii) of subsection 8.2(H)(1). Upon receipt by Agent of confirmation from the requisite percentage of Lenders required by subsection 8.2(H)(1), if any, of its authority to release or compromise any particular item or types of property covered by the Security Documents, and upon at least ten (10) Business Days prior written request by Borrower, Agent shall (and is hereby irrevocably authorized by Lenders to) execute such documents as may be necessary to evidence the release or compromise of the Liens granted to Agent, for the benefit of Agent and Lenders, upon such Collateral, provided that (i) Agent shall not be required to execute any such document on terms which, in Agent's opinion, would expose Agent to liability or create any obligation or entail any consequence other than the release or compromise of such Liens without recourse or warranty, and (ii) such release or compromise shall not in any manner discharge, affect or impair the Obligations or any Liens upon 37 (or obligations of any Loan Party, in respect of), all interests retained by any Loan Party, including (without limitation) the proceeds of any sale, all of which shall continue to constitute part of the property covered by the Security Documents. (3) Absence of Duty. Agent shall have no obligation whatsoever to any Lender or any other Person to assure that the property covered by the Security Documents exists or is owned by Borrower or is cared for, protected or insured or has been encumbered or that the Liens granted to Agent have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent in this subsection 8.2(H) or in any of the Loan Documents, it being understood and agreed that in respect of the property covered by the Security Documents or any act, omission or event related thereto, Agent may act in any manner it may deem appropriate, in its discretion, given Agent's own interest in property covered by the Security Documents as one of the Lenders and that Agent shall have no duty or liability whatsoever to any of the other Lenders, provided that Agent shall exercise the same care which it would in dealing with loans for its own account. (I) Agency for Perfection. Agent and each Lender hereby appoint each other Lender as agent for the purpose of perfecting Agent's security interest in assets which, in accordance with Article 9 of the Uniform Commercial Code in any applicable jurisdiction, can be perfected only by possession. Should any Lender (other than Agent) obtain possession of any such Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent's request therefor, shall deliver such Collateral to Agent or in accordance with Agent's instructions. Each Lender agrees that it will not have any right individually to enforce or seek to enforce any Security Document or to realize upon any collateral security for the Loans unless instructed to do so by Agent, it being understood and agreed that such rights and remedies may be exercised only by Agent. 8.3 Amendments, Consents and Waivers for Certain Actions. (A) Except as to matters set forth in other subsections hereof or in any other Loan Document as requiring only Agent's consent, the consent of (A) Agent, (B) (i) the Lender, if there is only one Lender, and (ii) if there is more than one Lender the Lenders owning the percentage of the Term B Loan Commitment and the outstanding Term A Loan as may from time to time be specified in any Lender Addition Agreement, and (C) Borrower will be required to amend, modify, terminate, or waive any provision of this Agreement or any of the other Loan Documents. 8.4 Set Off and Sharing of Payments. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, during the continuance of any Event of Default, each Lender is hereby authorized by Borrower at any time or from time to time, with reasonably prompt subsequent notice to Borrower (any prior or contemporaneous notice being hereby expressly waived) to set off and to appropriate and to apply any and all (A) balances held by such Lender at any of its offices for the account of Borrower or 38 any of its Subsidiaries (regardless of whether such balances are then due to Borrower or its Subsidiaries), and (B) other property at any time held or owing by such Lender to or for the credit or for the account of Borrower or any of its Subsidiaries, against and on account of any of the Obligations; except that no Lender shall exercise any such right without the prior written consent of Agent. Any Lender exercising a right to set off shall, to the extent the amount of any such set off exceeds its Pro Rata Share of the amount set off, purchase for cash (and the other Lenders shall sell) interests in each such other Lender's Pro Rata Share of the Obligations as would be necessary to cause such Lender to share such excess with each other Lender in accordance with their respective Pro Rata Shares. Borrower agrees, to the fullest extent permitted by law, that any Lender may exercise its right to set off with respect to amounts in excess of its Pro Rata Share of the Obligations and upon doing so shall deliver such excess to the Agent for the benefit of all Lenders in accordance with their Pro Rata Shares. 8.5 Disbursement of Funds. Agent may, on behalf of Lenders, disburse funds to Borrower for Loans requested. Each Lender shall reimburse Agent on demand for all funds disbursed on its behalf by Agent, or if Agent so requests, each Lender will remit to Agent its Pro Rata Share of any Loan before Agent disburses same to Borrower. If Agent elects to require that each Lender make funds available to Agent, prior to a disbursement by Agent to Borrower, Agent shall advise each Lender by telephone or telecopy of the amount of such Lender's Pro Rata Share of the Loan requested by Borrower no later than 1:00 p.m. Atlanta, Georgia time on the Funding Date applicable thereto, and each such Lender shall pay Agent such Lender's Pro Rata Share of such requested Loan, in same day funds, by wire transfer to Agent's account on such Funding Date. If any Lender fails to pay the amount of its Pro Rata Share within one (1) Business Day after Agent's demand, Agent shall promptly notify Borrower, and Borrower shall immediately repay such amount to Agent. Any repayment required pursuant to this subsection 8.5 shall be without premium or penalty. Nothing in this subsection 8.5 or elsewhere in this Agreement or the other Loan Documents, including without limitation the provisions of subsection 8.6, shall be deemed to require Agent to advance funds on behalf of any Lender or to relieve any Lender from its obligation to fulfill its commitments hereunder or to prejudice any rights that Agent or Borrower may have against any Lender as a result of any default by such Lender hereunder. 8.6 Disbursements of Payments. (A) Loan Principal Payments. Payments of principal of the Loans will be settled on the date of receipt if received by Agent by 11:00 a.m. Atlanta, Georgia time, and on the Business Day immediately following the date of receipt if received by Agent after 11:00 a.m. Atlanta, Georgia time. (B) Availability of Lender's Pro Rata Share. (1) Unless Agent shall have received notice from a Lender prior to a Funding Date that such Lender will not make available its Pro Rata Share of a Loan requested by Borrower, Agent may assume that such Lender has made such amount available to Agent on the Funding Date. If a Lender has not in fact made its Pro Rata Share available to Agent on such date, then such Lender and Borrower severally agree to pay to Agent forthwith on demand such 39 amount without set-off, counterclaim or deduction of any kind, together with interest thereon, for each day from and including the date such amount is made available to Agent by such Lender to but excluding the date of payment to Agent, at (a) in the case of such Lender, the prime rate of interest as quoted from time to time in the Money Rates Section of the most recent edition of the Wall Street Journal or (b) in the case of Borrower, the interest rate applicable under this Agreement with respect to such Loan. Until any such amount is paid to Agent, Agent shall not be obligated to submit to such Lender any payment made by Borrower to Agent with respect to any Loan or any fees or other payments with respect thereto. (2) Nothing contained in this subsection 8.6(B) will be deemed to relieve a Lender of its obligation to fulfill its commitments or to prejudice any rights Agent or Borrower may have against such Lender as a result of any default by such Lender under this Agreement. (C) Return of Payments (1) If Agent pays an amount to a Lender under this Agreement in the belief or expectation that a related payment has been or will be received by Agent from Borrower and such related payment is not received by Agent, then Agent will be entitled to recover such amount from such Lender without set-off, counterclaim or deduction of any kind together with interest thereon, for each day from and including the date such amount is made available by Agent to such Lender to but excluding the date of repayment to Agent, at the prime rate of interest as quoted from time to time in the Money Rates Section of the most recent edition of the Wall Street Journal. (2) If Agent determines at any time that any amount received by Agent under this Agreement must be returned to Borrower or paid to any other person pursuant to any requirement of law, court order or otherwise, then, notwithstanding any other term or condition of this Agreement, Agent will not be required to distribute any portion thereof to any Lender. In addition, each Lender will repay to Agent on demand any portion of such amount that Agent has distributed to such Lender, together with interest at such rate, if any, as Agent is required to pay to Borrower or such other Person, without set-off, counterclaim or deduction of any kind. SECTION 9 MISCELLANEOUS 9.1 Indemnities. In addition to the payment of expenses pursuant to Section 1.3(C), Borrower agrees to defend (subject to Indemnitees' selection of counsel), indemnify, pay and hold harmless Agent and Lenders, and the officers, partners, directors, employees, agents and affiliates of any of Agent and Lenders (collectively called the "Indemnitees"), from and against any and all Indemnified Liabilities (as hereinafter defined); provided that Borrower shall not have any obligation to any Indemnitee hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise solely from the gross negligence or willful misconduct of that 40 Indemnitee as determined by a final, non-appealable judgment of a court of competent jurisdiction. As used herein, "Indemnified Liabilities" means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, actions, judgments, suits, claims (including environmental claims), costs (including the costs of any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up or abate any hazardous materials), expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and environmental laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of (i) the Collateral, this Agreement or the other Loan Documents or any other Related Transaction Documents or the transactions contemplated hereby or thereby (including Lenders' agreement to make the Loans hereunder or the use or intended use of the proceeds thereof or any enforcement of any of the Loan Documents (including any sale of collection from, or other realization upon any of the Collateral or the enforcement of any guaranties), or (ii) any environmental claim or any hazardous materials activity relating to or arising from, directly or indirectly, any past or present activity, operation, land ownership, or practice of Borrower or any of its Subsidiaries. 9.2 Amendments and Waivers. Except as otherwise provided herein, no amendment, modification, termination or waiver of any provision of this Agreement, the Notes or any of the other Loan Documents, or consent to any departure by any Loan Party therefrom, shall in any event be effective unless the same shall be in writing and signed by (A) Agent, (B)(i) if there is only one Lender, such Lender, and (ii) if there is more than one Lender the Lenders owning the percentage of the Term B Loan Commitment and the outstanding Term A Loan as may from time to time be specified in any Lender Addition Agreement, and (C) the applicable Loan Party. Each amendment, modification, termination or waiver shall be effective only in the specific instance and for the specific purpose for which it was given. No amendment, modification, termination or waiver shall be required for Agent to take additional Collateral pursuant to any Loan Document. No notice to or demand on Borrower or any other Loan Party in any case shall entitle Borrower or any other Loan Party to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this subsection 9.2 shall be binding upon each holder of the Notes at the time outstanding, each future holder of the Notes, and, if signed by any Loan Party, on such Loan Party. 9.3 Notices. Any notice or other communication required shall be in writing addressed to the respective party as set forth below and may be personally served, telecopied, sent by overnight courier service or U.S. mail and shall be deemed to have been given: (a) if delivered 41 in person or by courier, when delivered; (b) if delivered by telecopy, received when sent, answer back received; or (c) if delivered by certified or registered U.S. mail, four (4) Business Days after deposit with postage prepaid and properly addressed. Notices shall be addressed as follows: If to Borrower: Nassau Broadcasting Partners, L.P. 619 Alexander Road Third Floor Princeton, New Jersey 08540 ATTN: Michael Libretti Telephone: (609) 924-1515 Ext. 202 Telecopy: (609) 924-1584 With a copy to: Sterns & Weinroth 50 West State Street Suite 1400 Trenton, New Jersey 08607-1298 ATTN: Mark D. Schorr Telephone: (609) 392-2100 Telecopy: (609) 392-7956 If to Agent or AMRESCO: AMRESCO Commercial Finance, Inc. 235 Peachtree Street, N.E. Atlanta, Georgia 30303 ATTN: Cindy Strahin Telephone: (404) 654-2669 Telecopy: (404) 654-2294 With a copy to: AMRESCO Commercial Finance, Inc. 700 N. Pearl Street, Suite 2400 Dallas, Texas 75201 ATTN: Steven S. Pluss Telephone: (214) 953-7982 Telecopy: (214) 999-7474 With a copy to: Gardere & Wynne, L.L.P. 1601 Elm Street, Suite 3000 Dallas, Texas 75201 ATTN: Gary B. Clark, Esq. Telephone: (214) 999-4341 Telecopy: (214) 999-4667 If to a Lender: To the address set forth on the signature 42 pages hereto or in the applicable Lender Addition Agreement 9.4 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay on the part of Agent or any Lender to exercise, nor any partial exercise of, any power, right or privilege hereunder or under any other Loan Documents shall impair such power, right, or privilege or be construed to be a waiver of any Default or Event of Default. All rights and remedies existing hereunder or under any other Loan Document are cumulative to and not exclusive of any rights or remedies otherwise available. 9.5 Marshaling; Payments Set Aside. Neither Agent nor any Lender shall be under any obligation to marshal any assets in payment of any or all of the Obligations. To the extent that Borrower makes payment(s) or Agent enforces its Liens or Agent or any Lender exercises its right of set-off, and such payment(s) or the proceeds of such enforcement or set-off is subsequently invalidated, declared to be fraudulent or preferential, set aside, or required to be repaid by anyone, then to the extent of such recovery, the Obligations or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or set-off had not occurred. The agreements set forth in this subsection 9.5 shall survive the payment of the Loans and the termination of this Agreement. 9.6 Severability. The invalidity, illegality, or unenforceability in any jurisdiction of any provision under the Loan Documents shall not affect or impair the remaining provisions in the Loan Documents. 9.7 Lenders' Obligations Several; Independent Nature of Lenders' Rights. The obligation of each Lender hereunder is several and not joint and no Lender shall be responsible for the obligation or commitment of any other Lender hereunder. In the event that any Lender at any time should fail to make a Loan as herein provided, the Lenders, or any of them, at their sole option, may make the Loan that was to have been made by the Lender so failing to make such Loan. Nothing contained in any Loan Document and no action taken by Agent or any Lender pursuant hereto or thereto shall be deemed to constitute Lenders to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt. 9.8 Headings. Section and subsection headings are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purposes or be given substantive effect. 9.9 Applicable Law. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF GEORGIA AND, TO THE EXTENT APPLICABLE, THE COMMUNICATIONS ACT, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. THIS AGREEMENT AND THE NOTES ARE HEREBY ENTERED 43 INTO IN THE STATE OF GEORGIA AND THE PLACE OF PERFORMANCE OF THE LOAN DOCUMENTS BY THE LOAN PARTIES IS IN THE STATE OF GEORGIA. 9.10 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns except that Borrower may not assign its rights or obligations hereunder. 9.11 No Fiduciary Relationship. No provision in the Loan Documents and no course of dealing between the parties shall be deemed to create any fiduciary duty owing to Borrower by Agent or any Lender. 9.12 Construction. Agent, each Lender and Borrower acknowledge that each of them has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review the Loan Documents with its legal counsel and that the Loan Documents shall be constructed as if jointly drafted by Agent, each Lender and Borrower. 9.13 Advertising. On or after the Closing Date, Agent or any Lender may, at their own expense, issue news releases and publish "tombstone" advertisements and other announcements relating to this transaction in newspapers, trade journals and other appropriate media. 9.14 Consent to Jurisdiction and Service of Process. (A) BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR GEORGIA STATE COURT SITTING IN ATLANTA, GEORGIA IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS AND BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY BORROWER AGAINST AGENT OR ANY LENDER OR ANY AFFILIATE THEREOF INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN ATLANTA, GEORGIA. (B) BORROWER HEREBY AGREES THAT SERVICE UPON THEM BY REGISTERED MAIL SHALL CONSTITUTE SUFFICIENT NOTICE AND EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. 44 9.15 Waiver of Jury Trial. BORROWER, AGENT AND EACH LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. BORROWER, AGENT AND EACH LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. BORROWER, AGENT AND EACH LENDER FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. BORROWER, AGENT AND EACH LENDER ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF AGENT AND EACH LENDER. 9.16 Survival of Warranties and Certain Agreements. All agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement, the making of the Loans, and the execution and delivery of the Notes. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of Borrower set forth in subsections 1.3(C) and 9.1 shall survive the payment of the Loans, the termination of this Agreement and the exercise of any remedies under the Loan Documents. 9.17 Entire Agreement. This Agreement, the Notes and the other Loan Documents referred to herein embody the final, entire agreement among the parties hereto and supersede any and all prior commitments, agreements, representations, understandings, whether oral or written, relating to the subject matter hereof and may not be contradicted or varied by evidence of prior, contemporaneous or subsequent oral agreements or discussions of the parties hereto. 9.18 Counterparts; Effectiveness. This Agreement and any amendments, waivers, consents or supplements may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be 45 deemed an original, but all of which counterparts together shall constitute but one in the same instrument. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto. 9.19 FCC Approval. (a) Notwithstanding anything herein or therein to the contrary, to the extent this Agreement or any other Related Transactions Document purports to grant or to require Borrower to grant to Agent a security interest in the FCC Authorizations of Borrower, Agent shall only have a security interest in such FCC Authorizations at such times and to the extent that a security interest in such FCC Authorizations is permitted under applicable law. Notwithstanding anything to the contrary set forth herein or therein, Agent agrees that to the extent prior FCC approval is required pursuant to the Communications Act for (i) the operation and effectiveness of any grant, right or remedy hereunder or under the other Related Transactions Documents or (ii) taking any action that may be taken by Agent hereunder or under the other Related Transactions Documents, such grant, right, remedy or actions will be subject to such prior FCC approval having been obtained by or in favor of Agent (and Borrower will use its best efforts to obtain any such approval as promptly as possible). Borrower agrees that, upon and during the continuance of an Event of Default and at Agent's request, Borrower shall file, or cause to be filed, such applications for approval and shall take all other and further actions required by Agent to be granted such governmental authorizations as are necessary to assign Borrower's FCC Authorizations to Agent or its successors or assigns, or to transfer ownership and control over Borrower or over any other Person holding a FCC Authorization for any Borrower Station, to Agent or its successors or assigns. To enforce the provisions of this Section 9.19, Agent is empowered to request the appointment of a receiver from any court of competent jurisdiction. Such receiver shall be instructed to seek from the FCC an involuntary transfer of control over Borrower. Borrower hereby agrees to authorize such an application for involuntary transfer of control upon the request of the receiver so appointed and, if Borrower shall refuse to authorize such application, its authorization may be required by the court. Upon the occurrence and continuance of an Event of Default, Borrower shall further use its best efforts to assist in obtaining approval of the FCC, if required, for any action or transactions contemplated by this Agreement or the other Related Transactions Documents, including without limitation, preparation, execution and filing with the FCC of the assignor's or transferor's portion of any application or applications for consent to the assignment of any FCC Authorization, or transfer of control over Borrower or any other Person holding a FCC Authorization for a Borrower Station, necessary or appropriate under the Communications Act for approval of the transfer or assignment of any portion of, the Collateral provided for herein, together with assignment of any FCC Authorization or other authorization. Borrower acknowledges that the assignment of FCC Authorizations, or transfer of control over Borrower or other Person holding a FCC Authorization for a Borrower Station, is integral to Agent's and each Lender's realization of the value of their Collateral, that there is no adequate remedy at law for failure by Borrower to comply with the provisions of this Section 9.19, and that such failure would not be adequately compensable in damages, and therefore, agree that the agreements contained in this Section 9.19 may be specifically enforced. 46 (b) Notwithstanding anything to the contrary contained in this Agreement or any other Related Transactions Document, neither Agent, Lender nor any Loan Party shall, without first obtaining the approval of the FCC, take any action pursuant to this Agreement or any other Related Transactions Document which would constitute or result in any acquisition or transfer of ownership of Borrower or its assets, assignment of any FCC Authorization or any change of control that would require, under then existing law (including the Communications Act), the prior approval of the FCC. (c) Agent acknowledges that, after the occurrence of an Event of Default, all requisite consents of the FCC must be obtained prior to the exercise by Agent, any receiver appointed to pursuant to Section 9.19(a) hereof, or any purchaser at a public or private sale, of any rights as a holder of any FCC Authorization. SECTION 10 DEFINITIONS 10.1 Certain Defined Terms. The terms defined below are used in this Agreement as so defined. Terms defined in the preamble and recitals to this Agreement are used in this Agreement as so defined. "Accounts Receivable" means accounts receivable as determined in accordance with GAAP. "Affiliate" means any Person: (a) directly or indirectly controlling, controlled by, or under common control with, Borrower; (b) directly or indirectly owning or holding five percent (5%) or more of any equity interest in Borrower or any member of such Person's family, whether by blood or marriage; or (c) five percent (5%) or more of whose voting stock or other equity interest is directly or indirectly owned or held by Borrower. For purposes of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by" and "under common control with") means the possession directly or indirectly of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or by contract or otherwise. "Agent" means AMRESCO in its capacity as agent for the Lenders under this Agreement and each of the other Loan Documents and any successor in such capacity appointed pursuant to subsection 8.2. "Agreement" means this Loan Agreement (including all schedules and exhibits hereto) as it may be amended, supplemented or otherwise modified from time to time. 47 "AMRESCO" has the meaning assigned to such term in the preamble to this Agreement. "Annual Surplus Cash Flow Payment" means an amount equal to fifty percent (50%) of the Surplus Cash Flow of Borrower for the immediately preceding fiscal year pursuant to the calculation on Exhibit 1.5(B). "Annual Surplus Cash Flow Payment Date" means the earlier of (a) five (5) days after the delivery of the audited financial statements required by Section 4.6(C) to Agent, or (b) one hundred twenty (120) days after the end of each fiscal year of Borrower. "Approved Lenders" means the following holders of Indebtedness of Borrower: the holders of the WILT/WKRF Note, the holder of the WSUS Studio Payment, and each payee under any Capital Lease Obligations of Borrower. "Bankruptcy Code" means Title 11 of the United States Code entitled "Bankruptcy", as amended from time to time or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect and all rules and regulations promulgated thereunder. "Borrower" shall have the meaning ascribed to that term in the preamble of this Agreement. "Borrower Stations" means WHCY-FM, licensed to Blairstown, New Jersey, WSBG-FM, licensed to Stroudsburg, Pennsylvania; WVPO-AM, licensed to Stroudsburg, Pennsylvania, WNNJ-FM, licensed to Newton, New Jersey; WNNJ-AM, licensed to Newton, New Jersey; WSUS-FM, licensed to Franklin, New Jersey; WPST-FM, licensed to Trenton, New Jersey, WHWH-AM, licensed to Princeton, New Jersey; WTTM-AM (Construction Permit), licensed to Princeton, New Jersey; WJLK-FM, licensed to Asbury Park, New Jersey; WADB-AM, licensed to Asbury Park, New Jersey; and WBBO-FM, licensed to Ocean Acres, New Jersey. "Broadcast Cash Flow" means (i) Net Cash Revenue, minus (ii) Operating Expenses (as determined in accordance with GAAP), other than Corporate Overhead. "Business Day" means any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of Georgia, or the State of Texas, or is a day on which banking institutions located in any such states are closed. 48 "Capital Expenditures" means, for any period, all expenditures which are classified as capital expenditures in accordance with GAAP, excluding all such expenditures associated with Capital Lease Obligations. "Capital Lease Obligations" means, as to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal property, which obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP. For purposes of this Agreement, the amount of such Capital Lease Obligations shall be the capitalized amount thereof, determined in accordance with GAAP. "Capitalization Documents" means, collectively: (a) any or all of the stock certificates, notes, debentures or other instruments representing securities bought, sold or issued, or loans made, to facilitate the consummation of the Related Transactions; (b) the indentures or other documents pursuant to which such stock, notes, debentures or other instruments are issued or to be issued; (c) each document governing the issuance of, or setting forth the terms of, such stock, notes, debentures or other instruments; (d) any stockholders, registration or intercreditor agreement among or between the holders of such stock, notes, debentures or other instruments; (e) the Investor Loan Documents; (f) all other instruments, documents and agreements executed in connection with the Related Transactions; but excluding all Loan Documents. "Closing Date" means August 28, 1998. "Collateral" means, collectively: (a) all capital stock and other property pledged pursuant to the Security Documents; (b) all "Collateral" as defined in the Security Documents; (c) all real property mortgaged pursuant to the Security Documents; (d) the Escrow Amount; and (e) any property or interest provided in addition to or in substitution for any of the foregoing; including but not limited to the following: (A) 1st priority security interest in 100% of the Borrower's assets including but not limited to all FCC Authorizations (to the extent permitted by law, including the Communications Act) for all Borrower Stations, the proceeds of any FCC approved assignment of the FCC Authorizations for the Borrower Stations or transfer of control over Borrower, cash, deposit accounts, accounts receivable, contract rights, equipment, inventory, and other tangible and intangible assets; (B) 1st lien deed of trust or mortgage and title insurance in appropriate amount on all owned or leased real property interests used in business operations including but not limited to (i) leasehold deed 49 of trust covering the studio and offices located at 619 Alexander Road, Third Floor, Princeton, New Jersey; (ii) deed of trust covering the WSBG-FM, WPST-FM, WNNJ-AM, WVPO-AM, WJLK-FM, WADB-AM, WILT-AM and WHWH-AM tower sites; and (iii) deed of trust covering the studio and offices of WNNJ-AM, WNNJ-FM, WPST-FM, WSBG-FM, WVPO-AM and 50 Washington Rd., West Windsor, New Jersey (collectively, "Real Property Collateral"); (C) pledge of 100% of the issued and outstanding ownership interests in Borrower, Tower Holdings, General Partner and the Limited Partners (such parties executing such pledges and any other pledges required herein are collectively referred to herein as "Pledgors"); (D) assignment of all material leases used in the business operations; (E) assignment of all material contracts such as asset purchase agreements, local marketing agreements, time brokerage agreements, and joint sales agreements not previously described; (F) assignment, subordination and pledge agreements for all shareholder notes receivable, inter-company notes receivable, advances, etc., if any, between Borrower, guarantors and their related parties; (G) assignment of a key man life insurance policy for Mercatanti in the amount of $2,000,000 with Agent named as beneficiary; and (H) pledge of all of Borrower's interest in Tiab. "Commerce Bank Liens" means those certain Liens on assets of Tower Holdings in favor of Commerce Bank, N.A., securing that certain promissory note dated April 28, 1998 in the amount of $1,100,000 from Tower Holdings to Commerce Bank, N.A. "Communications Act" means the Communications Act of 1934, as amended from time to time, and all rules, regulations and written decisions and policies promulgated thereunder or under any other authority of the FCC. "Construction Permit" means the FCC Authorization which authorizes construction of the facilities necessary for operation of a Station. "Contingent Obligation," as applied to any Person, means any direct or indirect liability of that Person: (i) with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of 50 the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; (ii) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; or (iii) under any foreign exchange contract, currency swap agreement, interest rate swap agreement or other similar agreement or arrangement designed to alter the risks of that Person arising from fluctuations in currency values or interest rates. Contingent Obligations shall also include (a) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another, (b) the obligation to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement, and (c) any liability of such Person for the obligations of another through any agreement to purchase, repurchase or otherwise acquire such obligation or any property constituting security therefor, to provide funds for the payment or discharge of such obligation or to maintain the solvency, financial condition or any balance sheet item or level of income of another. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if not a fixed and determined amount, the maximum amount so guaranteed. "Corporate Overhead" means, on a consolidated basis (as determined in accordance with GAAP), all expenses which are not Operating Expenses (other than interest and taxes), including all salaries, management fees, consulting fees, accounting fees and legal fees of Borrower, including all payments (other than (i) reimbursement of expenses permitted pursuant to Section 3.8 to the extent included in Operating Expenses and (ii) expenses incurred with respect to the Related Transactions to the extent they are paid on the Closing Date with the proceeds of the Loans). "Current Interest" has the meaning assigned to such term in subsection 1.2(A). "Current Rate" has the meaning assigned to such term in subsection 1.2(A). "Default" means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default if that condition or event were not cured or removed within any applicable grace or cure period. "Default Interest" has the meaning assigned to such term in subsection 1.2(A). 51 "Deferred Interest" has the meaning assigned to such term in subsection 1.2(A). "Disability" means the inability of a Person because of physical or mental impairment to perform the essential functions of such Person's duties with respect to his employment with or without reasonable accommodation for ninety (90) consecutive days, or one hundred eighty (180) total days during any twelve month period. "Event of Default" has the meaning assigned to such term in Section 6.1 of this Agreement. "Expiry Date" means August 28, 1999, or August 28, 2000 in the event the Term B Loan Commitment is extended pursuant to clause (2) of Section 1.1(B). "FCC" means the Federal Communications Commission or any successor agency thereto performing functions similar to those performed by the Federal Communications Commission on the date hereof. "FCC Authorization" means the licenses, construction permits, or other authorizations issued by the FCC, or any successor agency and necessary for the ownership and/or operation of the Stations. "First Contingent Payment" has the meaning assigned to such term in the Partnership Agreement. "Funding Date" has the meaning assigned to such term in Section 7.2. "GAAP" means generally accepted accounting principles as set forth in opinions and pronouncements of the Accounting Principals Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board that are applicable to the circumstances as of the date of determination. "General Partner" means Nassau Broadcasting Partners, Inc., a Delaware corporation, and the sole general partner of Borrower. "Gross Revenue" means, for any period, all revenues of Borrower on a consolidated basis (as determined in accordance with GAAP) for such period, excluding revenue resulting from trade or barter transactions. "Holdings" means Nassau Broadcasting Holdings, Inc., a New Jersey corporation. 52 "Indebtedness," as applied to any Person, means: (a) all indebtedness for borrowed money; (b) that portion of obligations with respect to capital leases that is properly classified as a liability on a balance sheet in conformity with GAAP; (c) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money; (d) any obligation owed for all or any part of the deferred purchase price of property or services if the purchase price is due more than six (6) months from the date the obligation is incurred or is evidenced by a note or similar written instrument; and (e) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person. "Indemnified Liabilities" has the meaning assigned to such term in Section 9.1. "Indemnitees" has the meaning assigned to such term in Section 9.1. "Investment" means (i) any direct or indirect purchase or other acquisition by Borrower or any of its Subsidiaries of any beneficial interest in, including stock, partnership interest or other equity securities or any other Person; and (ii) any direct or indirect loan, advance or capital contribution by Borrower or any of its Subsidiaries to any other Person, including all indebtedness and accounts receivable from that other Person that are not current assets or did not arise from sales to that other Person in the ordinary course of business. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment. "Investor Indebtedness" means the Indebtedness of Borrower evidenced by the Investor Loan Documents. "Investor Investment Agreement" means that certain Investment Agreement dated July 31, 1995, by and among certain Investors, Borrower, and General Partner, as amended, modified, extended, restated or supplemented from time to time as permitted under the Subordination Agreement. "Investor Loan Documents" means the Investor Investment Agreement, the Investor Notes and all other instruments, documents and agreements executed by or on behalf of any Loan Party and delivered concurrently herewith or at any time hereafter to or for the benefit of the Investors in connection with the Investors Indebtedness and other transactions contemplated by the Investor Investment Agreement (including the Subordination Agreement), all as amended, supplemented or modified from time to time as permitted pursuant to the terms of this Agreement and the Subordination Agreement. 53 "Investor Notes" means those certain promissory notes, described on Schedule 1.1(A) and any amendment, renewal, extension or renewal thereof permitted pursuant to this Agreement and the Subordination Agreement. "Investors" means the Persons listed on Schedule 1.1(B) and any successor holder of an Investor Note. "Investors Pledge Agreement" means that certain Investors Pledge Agreement by and among the Investors and the Agent for the benefit of Lenders, as amended, modified, extended, restated or supplemented from time to time. "IRC" means the Internal Revenue Code of 1986, as amended from time to time and all rules and regulations promulgated thereunder. "Lender" or "Lenders" means AMRESCO and each other Person listed as such on the signature pages hereof together with their successors and permitted assigns pursuant to subsection 8.1. "Lender Addition Agreement" means an agreement in form and substance acceptable to Agent regarding a Lender's and such Lender's assignee's respective rights and obligations with respect to assignments of the Loans and other interests under this Agreement and the other Loan Documents. "Lien" means any lien, mortgage, pledge, security interest, charge or encumbrance of any kind, whether voluntary or involuntary (including any conditional sale or other title retention agreement and any lease in the nature thereof), and any agreement to give any lien, mortgage, pledge, security interest, charge or encumbrance. "Limited Partners" means Nassau Broadcasting Company, a New Jersey corporation, and Nassau Holdings, Inc., a Delaware corporation, together the limited partners of Borrower. "LMA Agreements" means that (i) Local Marketing Agreement dated June 1, 1997, between Borrower and Great Scott Broadcasting, Ltd., (ii) Time Brokerage Agreement dated February 12, 1997, between Borrower and Manahawkin Communications Corp., (iii) Time Brokerage Agreement dated July 1, 1996, among Borrower, North Shore Broadcasting Corp. and Seashore Broadcasting, Corp., and (iv) Time Brokerage Agreement dated August 1, 1998, between Borrower and Port Jervis Broadcasting Co., Inc. "LMA Licensees" means Great Scott Broadcasting, Ltd., Manahawkin Broadcasting, Corp., North Shore Broadcasting Corp. and Seashore Broadcasting, Corp., and their successors or assigns. 54 "LMA Stations" means WNJO-FM, licensed to Trenton, New Jersey; WCHR-AM, licensed to Trenton, New Jersey; WOBM-FM, licensed to Toms River, New Jersey; WOBM-AM, licensed to Lakewood, New Jersey; WCHR-FM, licensed to Manahawkin, New Jersey; WDLC-AM, licensed to Port Jervis, New York; and WTSX-FM licensed to Port Jervis, New York. "Loan Account Records" has the meaning assigned to such term in Section 1.7. "Loan Documents" means this Agreement, the Notes, the Security Documents and all other instruments, documents and agreements executed by or on behalf of any Loan Party and delivered concurrently herewith or at any time hereafter to or for the benefit of Agent or any Lender in connection with the Loans and other transactions contemplated by this Agreement (including the Subordination Agreement and other Loan Documents referred to on Schedule 7.1), all as amended, supplemented or modified from time to time; but excluding all Capitalization Documents. "Loan Parties" means, collectively, Borrower, Borrower's Subsidiaries, General Partner, Limited Partners and any other Person (other than Agent and each Lender) which is or becomes a party to any Loan Document, or individually, a "Loan Party". "Loans" has the meaning assigned to such term in Section 1.1(B)(1). "Management Incentive" means an amount equal to twenty percent (20%) of the Surplus Cash Flow of Borrower for the immediately preceding fiscal year pursuant to the calculation on Exhibit 1.5(B). "Material Adverse Effect" means (a) a material adverse effect upon the business, operations, properties, assets or condition (financial or otherwise) or prospects of Borrower or any of its Subsidiaries or (b) the impairment of the ability of any Loan Party to perform its obligations under any Loan Document to which it is a party or of Agent or any Lender to enforce the Loan Document or collect any of the Obligations. In determining whether any individual event would result in a Material Adverse Effect, notwithstanding that such event does not of itself have such effect, a Material Adverse Effect shall be deemed to have occurred if the cumulative effect of such event and all other then existing events would result in a Material Adverse Effect. "Maximum Amount" has the meaning assigned to such term in subsection 1.3(c). "Mercatanti" means Louis F. Mercatanti, Jr. 55 "NBC" shall have the meaning ascribed to that term in the recitals to this Agreement. "Net Cash Revenues" means consolidated Gross Revenues less any agency's sales commission or discount. "Net Proceeds" means, with respect to any sale or other disposition of any assets (including in connection with any sale and leaseback transaction), cash received by Borrower or any of its Subsidiaries from such sale or other disposition after (a) provision for all Taxes measured by or resulting from such sale or other disposition after giving effect to any carryforwards, carrybacks or credits, (b) payment of all brokerage commissions and other fees and expenses related to such sale or other disposition, and (c) amounts applied to repayment of Indebtedness (other than the Obligations) secured by a Lien on the asset sold or disposed. "Net Working Capital" means, on a consolidated basis, Borrower's cash on hand (including cash equivalents and marketable securities, but excluding any amounts held by third parties as deposits), plus Accounts Receivable less than 90 days old from the date of the original invoice (excluding trade or barter Accounts Receivable), minus current liabilities (excluding trade or barter accounts payable and current maturities of long-term debt). "NH" shall have the meaning ascribed to that term in the recitals to this Agreement. "Note" or "Notes" means one or more of the Term A Loan Notes or the Term B Loan Notes, or any combination thereof. "Obligations" means all obligations, liabilities and indebtedness of every nature of any Loan Party from time to time owed to Agent or any Lender under the Loan Documents whether by declaration, demand, acceleration or otherwise, including the principal amount of all debts, claims and indebtedness, accrued and unpaid interest (including without limitation interest that, but for the filing of a petition in bankruptcy with respect to Borrower, would accrue on such obligations), premium, if any, and all fees, costs and expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from time to time hereafter owing, due or payable whether before or after the filing of a proceeding under the Bankruptcy Code by or against Borrower or any of its Subsidiaries. "Operating Expenses" means, for any period, all operating expenses (as determined in accordance with GAAP, but excluding non-cash charges such as depreciation, amortization and trade expenses) of Borrower, on a consolidated basis, for such period. 56 "Ownership Report" means, with respect to any of the Borrower Stations, the reports and certifications filed with the FCC pursuant to 47 C.F.R. ss. 73.3615. "Partnership Agreement" means that certain Second Restated Agreement of Limited Partnership of Nassau Broadcasting Partners, L.P., effective as of December 21, 1995. "Permitted Dispositions" has the meaning assigned to such term in Section 2.11. "Permitted Encumbrances" means the following: (1) Liens for taxes, assessments or other governmental charges not yet due and payable; (2) statutory Liens of landlords, carriers, warehousemen, mechanics, materialmen and other similar liens imposed by law, which are incurred in the ordinary course of business for sums not more than thirty (30) days delinquent or which are being contested in good faith; provided that a reserve or other appropriate provision shall have been made therefor and the aggregate amount of liabilities secured by such Liens is less than $25,000. (3) Liens (other than any Lien imposed by the Employee Retirement Income Security Act of 1974 or any rule or regulation promulgated thereunder) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety, stay, customs and appeal bonds, bids, leases, government contracts, trade contracts, performance and return of money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money) so long as no foreclosure sale or similar proceedings have been commenced with respect to any portion of the Collateral on account thereof; (4) deposits, in an aggregate amount not to exceed $10,000, made in the ordinary course of business to secure liability to insurance carriers; (5) any attachment or judgment Lien not constituting an Event of Default under subsection 6.1(J); (6) easements, rights of way, restrictions, and other minor defects or irregularities in title which do not interfere in any material respect with the ordinary conduct of the business of Borrower or any of its Subsidiaries or result in a material diminution in the value of any Collateral; 57 (7) any interest or title of a lessor or sublessor under any lease permitted by subsection 4.2 as long as the holder agrees to recognize the rights of such lessee or sublessee under the lease; (8) Liens in favor of Agent, for the benefit of Agent and Lenders; (9) the Commerce Bank Liens; (10) Liens securing the Indebtedness permitted under Section 3.1(F); and (11) Liens described on Schedule 3.2(A). "Person" means and includes natural persons, corporations, limited liability companies, limited partnerships, limited liability partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof and their respective permitted successors and assigns (or in the case of a governmental person, the successor functional equivalent of such Person). "Pledgors" has the meaning assigned to such term in definition of "Collateral" in Section 10.1. "Prepayment Date" means April 14, 1999. "Pro Forma" means the unaudited consolidated and consolidating balance sheets of Borrower and its Subsidiaries prepared in accordance with GAAP as of the Closing Date after giving effect to the Related Transactions. The Pro Forma is annexed hereto as Schedule 10.1(A). "Pro Rata Share" means, unless otherwise set forth in the most recent Lender Addition Agreement, if any, executed by a Lender, a fraction, the numerator of which is the outstanding principal amount of the Loans made by a Lender and the denominator of which is the aggregate amount of the outstanding principal amount of the Loans made by all Lenders. "Projections" means Borrower's forecasted consolidated and consolidating: (a) balance sheets; (b) profit and loss statements; and (c) cash flow statements, all prepared on a station by station basis and consistent with Borrower's historical financial statements, together with appropriate supporting details and a statement of underlying assumptions. The Projections represent and will represent as of the date thereof the good faith estimate of Borrower and its senior management concerning the most probable course of its business. 58 "Real Property Collateral" has the meaning assigned to such term in the definition of "Collateral" in Section 10.1. "Related Transactions" means the execution and delivery of the Related Transactions Documents, the funding of the Loans on the Closing Date, the funding of Investor Indebtedness, the repayment of the Indebtedness identified on Schedule 3.15 which is to be paid or redeemed in full on the Closing Date, and the payment of all fees, costs and expenses associated with all of the foregoing. "Related Transactions Documents" means the Loan Documents, the Capitalization Documents and all other agreements, instruments and documents executed or delivered in connection with the Related Transactions. "Restricted Junior Payment" means, either in cash or in kind, (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Borrower or any of its Subsidiaries now or hereafter outstanding, (ii) any redemption, conversion, exchange, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Borrower or any of its Subsidiaries now or hereafter outstanding; (iii) any payment or prepayment of interest on, principal of, premium, if any, redemption, conversion, exchange, purchase, retirement, defeasance, sinking fund or similar payment with respect to, any Investor Indebtedness; and (iv) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of Borrower or any of its Subsidiaries now or hereafter outstanding. "Restructure Agreement" means that certain Third Master Amendment and Agreement, and all exhibits thereto, dated as of December 30, 1997 among Borrower, General Partner, Limited Partners, Holdings, Mercatanti, Mercatanti as executor of the Estate of Louis F. Mercatanti, Sr., and the Investors. "Restructure Transaction" means the consummation of the transactions contemplated by and in accordance with the Restructure Agreement. "Second Preferred Amount" has the meaning assigned to such term in the Partnership Agreement. "Security Documents" means all instruments, documents and agreements executed by or on behalf of any Loan Party to guaranty or provide collateral security with respect to the Obligations including, without limitation, any security agreement or pledge agreement, any guaranty of the Obligations, any mortgage or deed of trust, and all instruments, documents and agreements executed pursuant to the terms of the foregoing, as each may be amended, supplemented or otherwise modified from time to time. 59 "Stations" means all Borrower Stations and LMA Stations. "Stroudsburg Sale" means any sale or other disposition of WSBG-FM licensed to Stroudsburg, Pennsylvania and WVPO-AM licensed to Stroudsburg, Pennsylvania, and their respective assets, properties or FCC Authorizations, after having obtained all required FCC consents. "Subordination Agreement" means, that certain Investor Subordination Agreement by and among Agent and the Investors dated the Closing Date. "Subsidiary" means, with respect to any Person, any corporation, partnership, association or other business entity of which more than fifty percent (50%) of the total voting power of shares of stock (or equivalent ownership or controlling interest) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof. "Surplus Cash Flow" means, for any fiscal year of Borrower, the Surplus Cash Flow of Borrower and its Subsidiaries, on a consolidated basis, determined pursuant to the calculations set forth on Exhibit 1.5(B). "Term A Loan" has the meaning assigned to such term in Section 1.1(A). "Term A Loan Note" or "Term A Loan Notes" means any one or more of the notes of Borrower substantially in the form of Exhibit 10.1(A), or any combination thereof. "Term B Loan Commitment" has the meaning assigned to such term in Section l.1(B)(l). "Term B Loan Note" or "Term B Loan Notes" means any one or more of the notes of Borrower substantially in the form of Exhibit 10.1(B), or any combination thereof. "Term B Loans" has the meaning assigned to such term in Section 1.l(B)(1). "Termination Date" means the earlier of (a) the acceleration of the Obligations pursuant to subsection 6.3 or (b) August 28, 2001. "Tiab" means Tiab Communications, Corp., a Pennsylvania corporation. "Tower Holdings" means Nassau Tower Holdings, L.L.C., a New Jersey limited liability company. 60 "Washington Road Proceeds" means any and all proceeds from the Washington Road Transfer after the payment of all indebtedness securing the Commerce Bank Liens. "Washington Road Transfer" has the meaning assigned to such term in Section 2.11. "WILT/WKRF Note" means that certain promissory note dated May 28, 1997, from Borrower to John A. Turtzo and Ronald L. Angle in the original principal amount of $350,000.00. "WOBM" means WOBM-FM, licensed to Toms River, New Jersey and WOBM-AM, licensed to Lakewood, New Jersey. "WSUS Studio Payment" means that certain obligation of Borrower to pay $250,000.00 to James E. Normoyle on November 5, 1999, pursuant to that certain Contract to Purchase and Lease Real Estate dated May 12, 1997, between James E. Normoyle and Borrower. 10.2 Other Definitional Provisions. References to "Sections," "subsections," "Exhibits" and "Schedules" shall be to Sections, subsections, Exhibits and Schedules, respectively, of this Agreement unless otherwise specifically provided. Any of the terms defined in subsection 10.1 may, unless the context otherwise requires, be used in the singular or the plural depending on the reference. In this Agreement, "hereof" "herein," "hereto," "hereunder" and the like mean and refer to this Agreement as a whole and not merely to the specific section, paragraph or clause in which the respective word appears; words importing any gender include the other gender; references to "writing" include printing, typing, lithography and other means of reproducing words in a tangible visible form; the words "including," "includes" and "include" shall be deemed to be followed by the words "without limitation"; references to agreements and other contractual instruments shall be deemed to include subsequent amendments, assignments, and other modifications thereto, but only to the extent such amendments, assignments and other modifications are not prohibited by the terms of this Agreement or any other Loan Document; references to Persons include their respective permitted successors and assigns or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons; and all references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations. (THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) 61 Witness the due execution hereof under seal by the respective duly authorized officers of the undersigned as of the date first written above. BORROWER: NASSAU BROADCASTING PARTNERS, L.P. By: Nassau Broadcasting Partners, Inc. Its General Partner By: /s/ Louis F. Mercatanti, Jr. ------------------------------------ Name: Louis F. Mercatanti, Jr. Title: President (CORPORATE SEAL) LENDERS: Term B Loan Commitment AMRESCO COMMERCIAL FINANCE, INC. $3,500,000.00 as Agent and a Lender 100% By: /s/ Steven S. Pluss ---------------------------------------- Name: Steven S. Pluss Title: Vice President (CORPORATE SEAL) 235 Peachtree Street, N.E. Atlanta, Georgia 30303 Attn: Cindy Strahin Telecopy No.: (404) 654-2294 with a copy to: AMRESCO Commercial Finance, Inc. 700 North Pearl Street, Suite 2400 Dallas, Texas 75201 Attn: Steven S. Pluss Telecopy No.: (214) 999-7474 EX-10.15 24 0024.txt COMMON STOCK REGISTRATION RIGHTS DTD 5/4/2000 =============================================================================== EXHIBIT 10.15 COMMON STOCK REGISTRATION RIGHTS AGREEMENT Dated as of May 4, 2000 By and Among NASSAU BROADCASTING PARTNERS, L.P., and MERRILL LYNCH CAPITAL CORPORATION, CAISSE DE DEPOT ET PLACEMENT DU QUEBEC, THE BANK OF NOVA SCOTIA, OZ MASTER FUND, LTD. and BANK OF MONTREAL ================================================================================ TABLE OF CONTENTS
Page Section 1. Definitions.............................................................................. 1 Section 2. Registration Rights...................................................................... 6 2.1 (a) Demand Registration.......................................................... 6 (b) Effective Registration....................................................... 7 (c) Priority in Demand Registrations Pursuant to Section 2.1..................... 8 (d) Restrictions on Sale by Holders.............................................. 8 (e) Selection of Underwriter..................................................... 8 (f) Expenses..................................................................... 9 2.2 (a) Piggy-Back Registration...................................................... 9 (b) Priority in Piggy-Back Registration.......................................... 10 (c) Restrictions on Sale by Holders.............................................. 11 2.3 Limitations, Conditions and Qualifications to Obligations Under Registration Covenants............................................................ 11 2.4 [Reserved]........................................................................ 13 2.5 Rule 144 and Rule 144A............................................................ 13 2.6 Underwritten Registrations........................................................ 13 Section 3. [Reserved]............................................................................... 13 Section 4. Registration Procedures.................................................................. 14 Section 5. Indemnification and Contribution......................................................... 20 Section 6. Miscellaneous............................................................................ 23 (a) Remedies.......................................................................... 23 (b) No Inconsistent Agreements........................................................ 23 (c) No Piggy-Back on Demand Registrations............................................. 23 (d) Amendments and Waivers............................................................ 23 (e) Notices........................................................................... 23 (f) Successors and Assigns............................................................ 24 (g) Counterparts...................................................................... 24 (h) Governing Law..................................................................... 24 (i) Severability...................................................................... 25 (j) Headings.......................................................................... 25 (k) Entire Agreement.................................................................. 25 (l) Securities Held by the Company or its Affiliates.................................. 25 (m) Third Party Beneficiary........................................................... 25
COMMON STOCK REGISTRATION RIGHTS AGREEMENT This COMMON STOCK REGISTRATION RIGHTS AGREEMENT (the "Agreement") is --------- made and entered into as of May 4, 2000, between Nassau Broadcasting Partners, L.P., (the "Company") a Delaware limited partnership organized under ------- the Delaware Revised Uniform Limited Partnership Act, MERRILL LYNCH CAPITAL CORPORATION ("Merrill Lynch"), CAISSE DE DEPOT ET PLACEMENT DU QUEBEC, THE BANK ------------- OF NOVA SCOTIA, OZ MASTER FUND, LTD. AND BANK OF MONTREAL (together with Merrill Lynch, the "Purchasers"). ---------- This Agreement is made pursuant to the Units Purchase Agreement dated as of May 4, 2000, among the Company, Nassau Finance Corp. (collectively with the Company, the "Issuers") and the Purchasers (the "Purchase Agreement"), with ------- ------------------ respect to the issuance and sale by the Company and the purchase by the Purchasers, severally, for gross proceeds of $60,000,488.85 of 117,359 units (the "Units") consisting of $117,359,000 aggregate principal amount at maturity ----- of the Issuers' 13% (resetting to 14%) Senior Discount Notes due 2010 (the "Notes") and 19,303.86 units of partnership interest in the Company representing ----- 2.0% of the aggregate equity interests in the Company on a fully diluted basis as of the date hereof plus such additional number of units of partnership interest or shares of capital stock of the Company representing up to an additional 3.5% of the aggregate equity interests of the Company on a fully diluted basis as may be issuable in accordance with the provisions of Section 2.01(a) of the Purchase Agreement. The execution of this Agreement is a condition to the obligations of the Purchasers under the Purchase Agreement. In consideration of the foregoing, the parties hereto agree as follows: Section 1. Definitions. As used in this Agreement, the following ----------- defined terms shall have the following meanings: "Advice" has the meaning ascribed to such term in Section 4 hereof. ------ "Affiliate" means, with respect to any specified Person, (i) any other --------- Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person or (ii) any other Person that owns, directly or indirectly, 10% or more of such specified Person's Voting Capital Stock (as defined in the Purchase Agreement) or any executive officer or director of any such specified Person or other Person or, with respect to any natural Person, any Person having a relationship with such Person by blood, marriage or adoption not more remote than first cousin. For purposes of this definition, "control" (including, with ------- correlative meanings, the terms "controlling," "controlled by" and "under ----------- ------------- ----- common control with") of any specified Person means the possession, ------------------- directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by agreement or otherwise. "Agreement" shall have the meaning ascribed to such term in the --------- preamble hereto. "Aurora Acquisition" means the acquisition of all of the outstanding ------------------ equity interests of Aurora Communications LLC. "Aurora Investors" has the meaning set forth in the Purchase ---------------- Agreement. "Aurora Registration Rights Agreement" means the Registration Rights ------------------------------------ Agreement contemplated to be entered into by the Company and the Aurora Investors at the consummation of the Aurora Acquisition, substantially in the form of Exhibit C to the Purchase and Exchange Agreement. "Business Day" shall mean a day that is not a Legal Holiday. ------------ "Capital Stock" shall mean, with respect to any Person, any and all ------------- shares, interests, partnership interests, participations, rights in or other equivalents (however designated and whether voting or non-voting) of such person's capital stock, and any rights (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock whether outstanding on the Issue Date or issued after the Issue Date. "Company" shall have the meaning ascribed to such term in the preamble ------- of this Agreement and shall also include the Company's permitted successors and assigns. "Common Stock" shall mean the Company's common stock authorized in ------------ connection with the Reorganization and any other class or series of common equity equivalent shares of the Company hereafter created. "Demand Registration" shall have the meaning ascribed to such term in ------------------- Section 2.1(a) hereof. "DTC" shall have the meaning ascribed to such term in Section 4(i) --- hereof. "Effectiveness Period" shall have the meaning ascribed to such term in -------------------- Section 2.1(a) hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, as ------------ amended from time to time. "Fair Market Value" shall mean the value of any securities as ----------------- determined (without any discount for lack of liquidity, the amount of such securities proposed to be sold or the fact that such securities held by any Holder of such security may represent a minority interest 3 in a private company) by a nationally or regionally recognized investment banking firm selected by the Company for the determination of such value. "Holder" shall mean each of the Purchasers for so long as the ------ Purchasers own any Registrable Securities, and each of their successors, assigns and direct and indirect transferees who become registered owners of such Registrable Securities. "Included Securities" shall have the meaning ascribed to such term in ------------------- Section 2.1(a) hereof. "Indemnified Person" shall have the meaning ascribed to such term in ------------------ Section 5(a). "Initial Public Equity Offering" shall mean a primary public offering ------------------------------ (whether or not underwritten, but excluding any offering pursuant to Form S-8 or F-8 under the Securities Act or any other publicly registered offering pursuant to the Securities Act pertaining to an issuance of shares of Common Stock or securities exercisable therefor under any benefit plan, employee compensation plan, or employee or director stock purchase plan) of Common Stock of the Company pursuant to an effective registration statement under the Securities Act. "Inspectors" shall have the meaning ascribed to such term in Section ---------- 4(m) hereof. "Issuers" shall have the meaning ascribed to such term in the preamble ------- to this Agreement. "Legal Holiday" shall mean a Saturday, a Sunday or a day on which (i) ------------- banking institutions in The City of New York are required or authorized by law or other government action to be closed and (ii) the principal U.S. securities exchange or market, if any, on which any Common Stock is listed or admitted to trading and the principal U.S. securities exchange or market, if any, on which the Warrants are listed or admitted to trading are closed for business. "LP Unit" means a unit of limited partnership interest in the Company ------- issued pursuant to the Purchase Agreement. "Merrill Lynch" shall have the meaning ascribed to such term in the ------------- preamble hereto. "Notes" shall have the meaning ascribed to such term in the preamble ----- hereto. 4 "Original Investors" shall mean Spectrum Equity Investors, L.P., ------------------ Spectrum Equity Investors II, L.P., Grotech Partners IV, L.P., Toronto Dominion (USA), Inc., Nassau Holdings, Inc., Noel P. Rahn and Nassau Broadcasting Company. "Original Investors Registration Rights Agreement" shall mean the ------------------------------------------------ Registration Rights Agreement dated as of May 4, 2000 between the Company and the Original Investors. "Person" shall mean any individual, corporation, limited liability ------ company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof or any other entity, including any predecessor of any such entity. "Piggy-Back Registration" shall have the meaning ascribed to such term ----------------------- in Section 2.2(a) hereof. "Prospectus" shall mean the prospectus included in any Registration ---------- Statement (including, without limitation, any prospectus subject to completion and a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. "Purchase and Exchange Agreement" means the Purchase and Exchange ------------------------------- Agreement dated as of March 24, 2000 among the Company and the Sellers named therein with respect to the Aurora Acquisition, as amended by Amendment No. 1 to the Purchase and Exchange Agreement dated as of May __, 2000 and as may be further amended from time to time. "Purchase Agreement" shall have the meaning ascribed to such term in ------------------ the preamble hereof. "Purchasers" shall have the meaning ascribed to such term in the ---------- preamble hereof. "Registrable Securities" shall mean any of (i) the LP Units or ---------------------- (following the Reorganization) Shares held by the Holders on or after the date hereof and (ii) any other securities issued or issuable with respect to the LP Units or Shares by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, reclassification, merger, consolidation or other reorganization or otherwise. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (a) a registration statement with respect to the offering of such securities by the holder thereof shall have been declared effective under the Securities Act and such securities shall have been disposed of 5 by such holder pursuant to such registration statement, (b) such securities have been sold to the public pursuant to, or are eligible for sale to the public without volume or manner of sale restrictions under, Rule 144(k) (or any similar provision then in force, but not Rule 144A) promulgated under the Securities Act, (c) such securities shall have been otherwise transferred and new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Company or its transfer agent and subsequent disposition of such securities shall not require registration or qualification under the Securities Act or any similar state law then in force, or (d) such securities shall have ceased to be outstanding. "Registration Expenses" shall mean all expenses incident to the --------------------- Company's performance of or compliance with this Agreement, including, without limitation, all SEC and stock exchange or National Association of Securities Dealers, Inc. registration and filing fees and expenses, fees and expenses of compliance with securities or blue sky laws (including, without limitation, reasonable fees and disbursements of counsel for the underwriters and the Holders in connection with blue sky qualifications of the Registrable Securities), printing expenses, messenger, telephone and delivery expenses, fees and disbursements of counsel for the Company and all independent certified public accountants, and other reasonable out-of- pocket expenses of Holders (it being understood that Registration Expenses shall not include, as to the fees and expenses of counsel, the fees and expenses of more than one counsel for the Holders and one counsel for the underwriters as to blue sky matters). "Registration Statement" shall mean any appropriate registration ---------------------- statement of the Company filed with the SEC pursuant to the Securities Act which covers any of the Registrable Securities pursuant to the provisions of this Agreement and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Reorganization" means a change in the form of organization of the -------------- Company from a limited partnership to a corporation, including the transfer of all assets and liabilities of the Company to its corporate successor and all other transactions consummated in connection therewith, in connection with the Initial Public Equity Offering of the Company's Common Stock or as otherwise required by Section 2.1 of this Agreement. "Requisite Equity Interests" shall mean a number of Registrable -------------------------- Securities equivalent to not less than 10% of the Registrable Securities outstanding as of any date of determination. 6 "Rule 144" shall mean Rule 144 promulgated under the Securities Act, -------- as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act. "Rule 144A" shall mean Rule 144A promulgated under the Securities Act, --------- as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the SEC. "SEC" shall mean the Securities and Exchange Commission. --- "Securities Act" shall mean the Securities Act of 1933, as amended -------------- from time to time. "Selling Holder" shall mean a Holder who is selling Registrable -------------- Securities in accordance with the provisions of Section 2.1 or 2.2, respectively. "Shares" shall mean shares of Common Stock issuable upon conversion of ------ the LP Units into Common Stock in connection with a Reorganization. "Suspension Period" shall have the meaning ascribed to such term in ----------------- Section 2.3(a). "Transfer Notice" shall have the meaning ascribed to such term in --------------- Section 3.2(c) hereof. "Units" shall have the meaning ascribed to such term in the preamble ----- of this Agreement. "Voting Stock" shall have the meaning ascribed to such term in the ------------ Purchase Agreement. Section 2. Registration Rights. ------------------- 2.1 (a) Demand Registration. Upon the earlier of (i) the fifth ------------------- year anniversary of the Issue Date, or (ii) 180 days following the Initial Public Offering of the Company Holders owning, individually or in the aggregate, at least the Requisite Equity Interests may, from time to time, make a written request to the Company to effect up to two registrations (each, a "Demand ------ Registration") under the Securities Act of their Registrable Securities. Within - ------------ 20 days after the receipt of such written request for a Demand Registration, the Company shall (i) notify the Holders 7 of all Registrable Securities that a Demand Registration has been requested, (ii) prepare, file with the SEC and use its best efforts to cause to become effective under the Securities Act within 150 days of such demand a Registration Statement with respect to such Registrable Securities and (iii) keep such registration statement continuously effective for such period of time as all of the Registrable Securities included in such registration statement shall have been sold thereunder (the "Effectiveness Period"). Any such request will specify -------------------- the number of Registrable Securities proposed to be sold and will also specify the intended method of disposition thereof. Within 30 days after receipt by any Holder of Registrable Securities of such notice from the Company, such Holder may request in writing that such Holder=s Registrable Securities be included in such Registration Statement and the Company shall include in such Registration Statement the Registrable Securities of any such Holder requested to be so included (the "Included Securities"). Each such request by such other Holders ------------------- shall specify the number of Included Securities proposed to be sold and the intended method of disposition thereof. Subject to Sections 2.1(b) and 2.1(f) hereof, the Company shall be required to effect a Demand Registration of Registrable Securities pursuant to this Section 2.1(a) up to a maximum of two occasions. If at the time of receipt of such request the Company is not a Subchapter C corporation, the Equity Holders and the Company shall take such steps as shall be necessary for the Company to reorganize as a Subchapter C corporation in order to permit Holders who have exercised their registration rights pursuant to this Section 2.1 to have registered for resale Shares. The terms of any such Reorganization shall be structured so as to provide the Holders with such number of Shares as results in the Holders holding an equivalent percentage of Capital Stock and Voting Stock in the Company after the Reorganization as they held immediately prior to the Reorganization to this Agreement. If such demand occurs during the "lock up" period (not to exceed 180 days) imposed on the Company pursuant to or in connection with any underwriting or purchase agreement relating to an underwritten Rule 144A or registered public offering of Common Stock or securities convertible into or exchangeable or exercisable for Common Stock, the Company shall not be required to so notify Holders of Registrable Securities and file such Demand Registration Statement prior to the end of such "lock up" or "black out" period, in which event the Company will use its best efforts to cause such Demand Registration statement to become effective no later than the later of (i) 150 days after such demand or (ii) 90 days after the end of such "lock up" or "black out" period. In the event of any "lock up" period under any underwriting or other purchase agreement, the Company shall so notify the holders of Registrable Securities. (b) Effective Registration. A Registration Statement shall not be ---------------------- deemed to have been effected as a Demand Registration unless it shall have been declared effective by the SEC, no later than the later of (i) 150 days after the request for a Demand Registration or (ii) 90 days after the end of any "lock up" period described in Section 2.1(a) hereof and the Company has complied in all material respects with all of its obligations under this Agreement with respect thereto; provided, however, that if, after such Registration Statement has become effective, the offering of Registrable Securities pursuant to such Registration Statement is or becomes the subject of any stop 8 order, injunction or other order or requirement of the SEC or any other governmental, judicial or administrative order or requirement that prevents, restrains or otherwise limits the sale of Registrable Securities pursuant to such Registration Statement for any reason not attributable to any Holder participating in such registration, and such Registration Statement has not become effective within a reasonable time period thereafter, such Registration Statement shall be deemed not to have been effected. If (i) a registration requested pursuant to this Section 2.1 is deemed not to have been effected or (ii) a Demand Registration does not remain effective under the Securities Act until at least the earlier of (A) an aggregate of 60 days (subject to Section 2.3 herein) after the effective date thereof or (B) the consummation of the distribution by the Holders of all of the Registrable Securities covered thereby, then such Demand Registration shall not count towards determining if the Company has satisfied its obligation to effect Demand Registrations pursuant to this Section 2.1. For purposes of calculating the 60-day period referred to in the preceding sentence, any period of time during which such Registration Statement was not in effect shall be excluded. The Holders of Registrable Securities shall be permitted to withdraw all or any part of the Registrable Securities from a Demand Registration. Notwithstanding any such withdrawal by a Holder of Registrable Securities, if the Company has complied with all of its obligations hereunder and has effected a Demand Registration within 150 days after the request for a Demand Registration, such withdrawal shall not require the Company to effect any additional Demand Registrations. (c) Priority in Demand Registrations Pursuant to Section 2.1. If a -------------------------------------------------------- Demand Registration pursuant to this Section 2.1 involves an underwritten offering and the lead managing underwriter advises the Company in writing that, in its view, the number of Registrable Securities requested by the Holders to be included in such registration, together with any other securities permitted to be included in such registration exceeds the number which, in the view of such lead managing underwriter, can be sold, then the number of such Registrable Securities to be included in such registration shall be allocated pro rata among all requesting Holders on the basis of the relative number of Registrable Securities then held by each such Holder (provided that any Registrable Securities thereby allocated to any such Holder that exceed such Holder=s request shall be reallocated among the remaining requesting Holders in like manner). In the event that the number of Registrable Securities requested in such registration is less than the number which, in view of the lead managing underwriter, can be sold, the Company may include in such registration the securities the Company proposes to sell up to the number that, in view of the lead managing underwriter, can be sold without adversely affecting the success of the offering, including the price at which the Registrable Securities can be sold. (d) Restrictions on Sale by Holders. Each Holder of Registrable ------------------------------- Securities whose Registrable Securities are covered by a Registration Statement filed pursuant to this Section 2.1 and are to be sold thereunder agrees, if and to the extent reasonably requested by the managing underwriter or underwriters in an underwritten public offering, not to effect any public sale or distribution of Registrable Securities or of securities of the Company of the same class as any securities included in such Registration Statement, including a sale pursuant to Rule 144 (except as 9 part of such underwritten offering), during the 30-day period prior to, and during the 180-day period (in connection with an initial public underwritten offering) or 90-day period (in connection with any subsequent public underwritten offering) beginning on, the closing date of such underwritten offering made pursuant to such Registration Statement, to the extent timely notified in writing by the Company or such managing underwriter or underwriters. The foregoing provisions of Section 2.1(d) shall not apply to any Holders of Registrable Securities if such Holder is prevented by applicable statute or regulation from entering into any such agreement; provided, however, that any such Holder shall undertake, in its request to participate in such underwritten offering, not to effect any public sale or distribution of any Registrable Securities commencing on the date of sale of such Registrable Securities unless it has provided 45 days= prior written notice of such sale or distribution to the managing underwriter or underwriters. (e) Selection of Underwriter. If the Holders so elect, the offering ------------------------ of such Registrable Securities pursuant to such Demand Registration shall be in the form of an underwritten offering. The Holders making such Demand Registration shall select one or more nationally recognized firms of investment bankers, who shall be reasonably acceptable to the Company, to act as the managing underwriter or underwriters in connection with such offering and shall select any additional investment bankers and managers to be used in connection with the offering. (f) Expenses. The Company will pay all Registration Expenses in -------- connection with the registrations requested pursuant to Section 2.1(a) hereof. Each Holder of Registrable Securities shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Securities pursuant to a Registration Statement requested pursuant to this Section 2.1. 2.2 (a) Piggy-Back Registration. If at any time the Company ----------------------- proposes to file a Registration Statement under the Securities Act with respect to an offering by the Company for its own account or for the account of any of its securityholders of any class of its common equity securities (other than (i) a registration statement on Form S-4 or S-8 (or F-4 or F-8) (or any substitute form that may be adopted by the SEC) or any other publicly registered offering pursuant to the Securities Act pertaining to the issuance of shares of Capital Stock or securities exercisable therefor under any benefit plan, employee compensation plan, or employee or director stock purchase plan, (ii) a registration statement filed in connection with an offer of securities solely to the Company=s existing securityholders or (iii) a Demand Registration), then the Company shall give written notice of such proposed filing to the Holders of Registrable Securities as soon as practicable (but in no event fewer than 15 days before the anticipated filing date or 10 days if the Company is subject to filing reports under the Exchange Act and able to use Form S-3 (or F-3) under the Securities Act), and such notice shall offer such Holders the opportunity to register such number of shares of Registrable Securities as each such Holder may request in writing within 12 days (or eight days if 10 the Company is subject to filing reports under the Exchange Act and able to use Form S-3 (or F-3) under the Securities Act) after receipt of such written notice from the Company (which request shall specify the Registrable Securities intended to be disposed of by such Selling Holder and the intended method of distribution thereof) (a "Piggy-Back Registration"). The Company shall use its ----------------------- best efforts to keep such Piggy-Back Registration continuously effective under the Securities Act in the qualifying jurisdictions until at least the earlier of (A) 60 days after the effective date thereof or (B) the consummation of the distribution by the Holders of all of the Registrable Securities covered thereby. The Company shall use its best efforts to cause the managing underwriter or underwriters, if any, of such proposed offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration to be included on the same terms and conditions as any similar securities of the Company or any other securityholder included therein and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method of distribution thereof. Any Selling Holder shall have the right to withdraw its request for inclusion of its Registrable Securities in any Registration Statement pursuant to this Section 2.2 by giving written notice to the Company of its request to withdraw. The Company may withdraw a Piggy-Back Registration at any time prior to the time it becomes effective or the Company may elect to delay the registration; provided, however, that the Company shall give prompt written notice thereof to participating Selling Holders. The Company will pay all Registration Expenses in connection with each registration of Registrable Securities requested pursuant to this Section 2.2, and each Holder of Registrable Securities shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder=s Registrable Securities pursuant to a Registration Statement effected pursuant to this Section 2.2. No registration effected under this Section 2.2, and no failure to effect a registration under this Section 2.2, shall relieve the Company of its obligation to effect a registration upon the request of Holders of Registrable Securities pursuant to Section 2.1 hereof, and no failure to effect a registration under this Section 2.2 and to complete the sale of securities registered thereunder in connection therewith shall relieve the Company of any other obligation under this Agreement. (b) Priority in Piggy-Back Registration. In a registration pursuant ----------------------------------- to Section 2.2 hereof involving an underwritten offering, if the managing underwriter or underwriters of such underwritten offering have informed, in writing, the Company and the Selling Holders requesting inclusion in such offering that in such underwriter's or underwriters' reasonable opinion the total number of securities which the Company, the Selling Holders and any other persons desiring to participate in such registration intend to include in such offering is such as to materially and adversely affect the success of such offering, including the price at which such securities can be sold, then the Company will be required to include in such registration only the amount of securities which it is so advised should be included in such registration. In such event: (x) in cases only involving the registration for sale of securities for the Company's own account (which may include securities included pursuant to the exercise of piggy-back rights herein and in other contractual commitments of the Company), securities shall be registered in such offering in the following order 11 of priority: (i) first, the securities which the Company proposes to register, (ii) second, provided that no securities sought to be included by the Company have been excluded from such registration, the securities which have been requested to be included in such registration by the Holders of Registrable Securities pursuant to this Agreement on a pari passu basis with (x) any securities of the Company as to which the Aurora Investors may be entitled to exercise "piggy-back" registration rights pursuant to the Aurora Registration Rights Agreement and (y) any securities of the Company as to which the Original Investors may be entitled to exercise "piggy-back" registration rights pursuant to the Original Registration Rights Agreement (such securities for the account of the Holders, the Aurora Investors and the Original Investors to be allocated among the Holders, the Aurora Investors and the Original Investors pro rata based on the amount of securities sought to be registered by the Holders, the Aurora Investors and the Original Investors) and (iii) third, provided that no securities sought to be included by the Company, the Aurora Investors, the Holders or the Original Investors have been excluded from such registration, the securities of any other Persons entitled to exercise "piggy-back" registration rights pursuant to contractual commitments of the Company (pro rata based on the amount of securities sought to be registered by such Persons); and (y) in cases not involving the registration for sale of securities for the Company's own account only, securities shall be registered in such offering in the following order of priority: (i) first, securities to be sold for the account of the Company and the securities of any Person whose exercise of a "demand" registration right pursuant to a contractual commitment of the Company is the basis for the registration (provided that if such Person is a Holder of Registrable Securities, as among Holders of Registrable Securities there shall be no priority and Registrable Securities sought to be included by Holders of Registrable Securities shall be included pro rata based on the amount of securities sought to be registered by such Persons), (ii) second, provided that no securities of the Company or such Person referred to in the immediately preceding clause (i) have been excluded from such registration, the securities requested to be included in such registration by the Holders of Registrable Securities (other than any Holder who is also a Person referred to in clause (i)) pursuant to this Agreement on a pari passu basis with (x) any securities of the Company as to which the Aurora Investors may be entitled to exercise "piggy- back" registration rights pursuant to the Aurora Registration Rights Agreement and (y) any securities of the Company as to which the Original Investors may be entitled to exercise "piggy-back" registration rights pursuant to the Original Registration Rights Agreement (such securities for the account of the Holders, the Aurora Investors and the Original Investors to be allocated among the Holders, the Aurora Investors and the Original Investors pro rata based on the amount of securities sought to be registered by the Holders, the Aurora Investors and the Original Investors) and (iii) third, provided that no securities of such Person referred to in the immediately preceding clause (i) or of the Holders, the Aurora Investors or the Original Investors, referred to in clause (ii) have been excluded from such registration, securities of any other Persons entitled to exercise "piggy-back" registration rights pursuant to contractual commitments (pro rata based on the amount of securities sought to be registered by such Persons). If, as a result of the provisions of this Section 2.2(b), any Selling Holder shall not be entitled to include all Registrable Securities in a Piggy- Back Registration that such Selling Holder 12 has requested to be included, such Selling Holder may elect to withdraw his request to include Registrable Securities in such registration. (c) Restrictions on Sale by Holders. Each Holder of Registrable ------------------------------- Securities whose Registrable Securities are covered by a Registration Statement filed pursuant to this Section 2.2 and are to be sold thereunder agrees, if and to the extent reasonably requested by the managing underwriter or underwriters in an underwritten public offering, not to effect any public sale or distribution of Registrable Securities or of securities of the Company of the same class as any securities included in such Registration Statement, including a sale pursuant to Rule 144 (except as part of such underwritten offering), during the 30-day period prior to, and during the 180-day period (in connection with an initial public underwritten offering) or 90-day period (in connection with each subsequent public underwritten offering) beginning on, the closing date of each underwritten offering made pursuant to such Registration Statement, to the extent timely notified in writing by the Company or such managing underwriter or underwriters. The foregoing provisions of Section 2.2(c) shall not apply to any Holders of Registrable Securities if such Holder is prevented by applicable statute or regulation from entering into any such agreement; provided, however, that any such Holder shall undertake, in its request to participate in any such underwritten offering, not to effect any public sale or distribution of any Registrable Securities commencing on the date of sale of such Registrable Securities unless it has provided 45 days= prior written notice of such sale or distribution to the managing underwriter or underwriters. 2.3 Limitations, Conditions and Qualifications to Obligations Under --------------------------------------------------------------- Registration Covenants. The obligations of the Company set forth in Sections - ---------------------- 2.1, 2.2 and 2.6 hereof are subject to each of the following limitations, conditions and qualifications: (a) Subject to the next sentence of this paragraph, the Company shall be entitled to postpone, for a reasonable period of time, the filing of, or suspend the effectiveness of, any registration statement or amendment thereto, or suspend the use of any prospectus and shall not be required to amend or supplement the registration statement, any related prospectus or any document incorporated therein by reference (other than an effective registration statement being used for an underwritten offering); provided that the duration of such postponement or suspension (a "Suspension ---------- Period") may not exceed an aggregate of 60 days after the event or ------ circumstance giving rise to such Suspension Period and the duration of such Suspension Period shall be excluded from the calculation of the 60-day period described in Section 2.1(b) hereof. Such Suspension Period may be effected only if (i) an event or circumstance occurs and is continuing as a result of which the registration statement, any related prospectus or any document incorporated therein by reference as then amended or supplemented or proposed to be filed would, in the Company's good faith judgment, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were 13 made, not misleading, and (ii) (A) the Company determines in its good faith judgment that the disclosure of such an event at such time would have a material adverse effect on the business, operations or prospects of the Company or (B) the disclosure otherwise relates to a material business transaction which has not yet been publicly disclosed; provided that the Effectiveness Period shall be extended by the number of days in any Suspension Period; provided further that the Company shall not be entitled to such postponement or suspension more than once in any 12-month period; provided further that the Company may suspend the effectiveness for a period not in excess of 5 Business Days to allow for the updating of the financial statements included in a Registration Statement to the extent required by law, not to exceed 45 days in aggregate in any 12-month period. If the Company shall so postpone the filing of a Registration Statement it shall, as promptly as possible, deliver a certificate signed by the chief financial officer of the Company or its general partner to the Selling Holders as to such determination, and the Selling Holders shall (1) have the right, in the case of a postponement of the filing or effectiveness of a Registration Statement, upon the affirmative vote of the Holders of not less than a majority of the Registrable Securities to be included in such Registration Statement, to withdraw the request for registration by giving written notice to the Company within 10 days after receipt of such notice or (2) in the case of a suspension of the right to make sales, receive an extension of the registration period equal to the number of days of the suspension. Any Demand Registration as to which the withdrawal election referred to in the preceding sentence has been effected shall not be counted for purposes of the Demand Registration the Company is required to effect pursuant to Section 2.1 hereof. (b) The Company's obligations shall be subject to the obligations of the Selling Holders, which the Selling Holders acknowledge, to furnish all information and materials and to take any and all actions as may be required under applicable federal and state securities laws and regulations to permit the Company to comply with all applicable requirements of the SEC, if applicable, and to obtain any acceleration of the effective date of such Registration Statement. 2.4 [Reserved] ---------- 2.5 Rule 144 and Rule 144A. The Company covenants that it will file ---------------------- the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the request of any Holder or beneficial owner of Warrants or Registrable Securities, make available such information necessary to permit sales pursuant to Rule 144A under the Securities Act. The Company further covenants that it will take such further action as any Holder of Warrants or Registrable Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Warrants or Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by 14 (a) Rule 144(k) and Rule 144A under the Securities Act, as such Rules may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. Upon the request of any Holder of Warrants or Registrable Securities, the Company will in a timely manner deliver to such Holder a written statement as to whether it has complied with such information requirements. 2.6 Underwritten Registrations. If any of the Registrable Securities -------------------------- covered by any Registration Statement are to be sold in an underwritten public offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of not less than a majority of the Registrable Securities to be sold thereunder and will be reasonably acceptable to the Company. No Holder of Registrable Securities may participate in any underwritten registration pursuant to a Registration Statement filed under this Agreement unless such Holder (a) agrees to (i) sell such Holder's Registrable Securities on the basis provided in and in compliance with any underwriting arrangements approved by the Holders of not less than a majority of the Registrable Securities to be sold thereunder and (ii) comply with Rules 101, 102 and 104 of Regulation M under the Exchange Act and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. If the Company has complied with all its obligations under this Agreement with respect to a Demand Registration or a Piggy-Back Registration relating to an underwritten public offering, all holders of Registrable Securities, upon request of the lead managing underwriter with respect to such underwritten public offering, will be required to not sell or otherwise dispose of any Registrable Security owned by them for a period not to exceed 180 days from the consummation of such underwritten public offering. Section 3. [Reserved]. ---------- Section 4. Registration Procedures. In connection with the ----------------------- obligations of the Company with respect to any Registration Statement pursuant to Sections 2.1, 2.2 and 2.6 hereof, the Company shall, except as otherwise provided: (a) A reasonable period of time prior to the initial filing of a Registration Statement and a reasonable period of time prior to the filing of any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference), furnish to the Holders and the managing underwriters, if any, copies of all such documents proposed to be filed, which documents (other than those incorporated or deemed to be incorporated by reference) shall be subject to the review of such Holders, and such underwriters, if any, and cause the officers and directors of the Company, counsel to the Company and independent certified public accountants to the 15 Company to respond to such reasonable inquiries as shall be necessary, in the opinion of counsel to such underwriters, to conduct a reasonable investigation within the meaning of the Securities Act; provided that the foregoing inspection and information gathering shall be coordinated on behalf of the Holders by Merrill Lynch. The Company shall not file any such Registration Statement or any amendments or supplements thereto which the Holders of a majority of the Registrable Securities included in such Registration Statement shall reasonably object on a timely basis. (b) Prepare and file with the SEC such amendments, including post- effective amendments to each Registration Statement as may be necessary to keep such Registration Statement continuously effective for the applicable time period required hereunder; cause the related Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; and comply with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all securities covered by such Registration Statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented. (c) Notify the Holders of Registrable Securities to be sold and the managing underwriters, if any, promptly, and (if requested by any such person) confirm such notice in writing, (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment is proposed to be filed, and (B) with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the SEC or any other Federal or state governmental authority for amendments or supplements to a Registration Statement or related Prospectus or for additional information, (iii) of the issuance by the SEC, any state securities commission, any other governmental agency or any court of any stop order suspending the effectiveness of such Registration Statement or of any order or injunction suspending or enjoining the use of a Prospectus or the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, and (v) of the happening of any event, the existence of any information becoming known that makes any statement made in a Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or omit to state any material fact required to be stated therein or necessary to make the statements therein, not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 16 (d) Use its best efforts to avoid the issuance of or, if issued, obtain the withdrawal of any order enjoining or suspending the effectiveness of the Registration Statement or the use of a Prospectus or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities covered thereby for sale in any jurisdiction described in Section 4(h) at the earliest practicable moment. (e) If requested by the managing underwriters, if any, or if none, by the Holders of a majority of the Registrable Securities being sold pursuant to such Registration Statement, (i) promptly incorporate in a Prospectus supplement or post-effective amendment such information as the managing underwriters, if any, or if none, such Holders reasonably believe should be included therein, and (ii) make all required filings of such Prospectus supplement or such post-effective amendment under the Securities Act as soon as practicable after the Company has received notification of the matters to be incorporated in such prospectus supplement or post- effective amendment; provided, however, that the Company shall not be required to take any action pursuant to this Section 4(e) that would in the opinion of counsel for the Company, violate applicable law. (f) Upon written request to the Company, furnish to each Holder of Registrable Securities to be sold pursuant to a Registration Statement and each managing underwriter, if any, without charge, at least one conformed copy of the Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference, and all exhibits to the extent requested (including those previously furnished or incorporated by reference) as soon as practicable after the filing of such documents with the SEC. (g) Deliver to each Holder of Registrable Securities to be sold pursuant to a Registration Statement and each managing underwriter, if any, without charge, as many copies of each Prospectus (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request; and, subject to the other provisions of this Agreement, the Company hereby consents to use of such Prospectus and each amendment or supplement thereto and each document supplemental thereto by each of the selling Holders of Registrable Securities and the underwriters or agents, if any, in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto. (h) Prior to any offering of Registrable Securities, use its best efforts to register or qualify or cooperate with the Holders of Registrable Securities to be sold, the managing underwriter or underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions as any such Holder or underwriter reasonably requests in writing; keep each 17 such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective hereunder and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by the applicable Registration Statement; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or to taxation in any jurisdiction where it is not so subject. (i) In connection with any sale or transfer of Registrable Securities that will result in such securities no longer being Registrable Securities, cooperate with the Holders of Registrable Securities and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates shall not bear any restrictive legends whatsoever and shall be in a form eligible for deposit with The Depository Trust Company ("DTC") or the stock transfer agent appointed by the Company; and to enable --- such Registrable Securities to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or such Holders may reasonably request at least two business days prior to any sale of Registrable Securities. (j) Upon the occurrence of any event contemplated by Section 4(c)(v) above, as promptly as practicable prepare a supplement or amendment, including if appropriate a post-effective amendment to each Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (k) Prior to the effective date of a Registration Statement, (i) provide the registrar for the Registrable Securities with certificates for such securities in a form eligible for deposit with DTC or the stock transfer agent and (ii) provide a CUSIP number for such securities. (l) Enter into such agreement (including an underwriting agreement in such form, scope and substance as is customary in underwritten offerings) and take all such other reasonable actions in connection therewith (including those reasonably requested by the managing underwriters, if any, or the Holders of a majority of the Registrable Securities being sold) in order to expedite or facilitate the disposition of such Registrable Securities, and, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration, (i) make such representations and warranties to 18 the Holders of such Registrable Securities and the underwriter or underwriters, if any, with respect to the business of the Company and the subsidiaries of the Company (including with respect to businesses or assets acquired or to be acquired by any of them), and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings, and confirm the same if any when requested; (ii) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, addressed to each selling Holder of Registrable Securities and each of the underwriters, if any), covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such underwriters; (iii) use their best efforts to obtain customary "cold comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed (where reasonably possible) to each Selling Holder of Registrable Securities and each of the underwriters, if any, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings; (iv) if an underwriting agreement is entered into, the same shall contain customary indemnification provisions and procedures no less favorable to the Selling Holder and the underwriters, if any, than those set forth in Section 5 hereof (or such other provisions and procedures acceptable to Holders of a majority of Registrable Securities covered by such Registration Statement and the managing underwriter, if any); and (v) deliver such documents and certificates as may be reasonably requested by the Holders of a majority of the Registrable Securities being sold and the managing underwriters or underwriters to evidence the continued validity of the representations and warranties made pursuant to clause (i) above and evidence compliance with any customary conditions contained in the underwriting agreement or other agreements entered into by the Company. (m) Make available for inspection by a representative of the selling Holders of Registrable Securities, any underwriter participating in any such disposition of Registrable Securities, if any, and any attorney, consultant or accountant retained by such representative of the selling Holders of Registrable Securities or underwriter (collectively, the "Inspectors"), at the offices where normally kept, during the reasonable ---------- business hours, all financial and other records, pertinent corporate documents and properties of the Company and the subsidiaries of the Company (including with respect to businesses and assets acquired or to be acquired to the extent that such information is available to the Company), and cause the officers, directors, agents and employees of the Company and its subsidiaries of the Company (including with respect to businesses and assets acquired or to be acquired to the extent that such information is available to the Company) to supply all information in each 19 case reasonably requested by any such Inspector in connection with such Registration Statement; provided, however, that such persons shall first agree in writing with the Company that any information that is reasonably and in good faith designated by the Company in writing as confidential at the time of delivery of such information shall be kept confidential by such Persons, unless (i) disclosure of such information is required by court or administrative order or is necessary to respond to inquiries of regulatory authorities, (ii) disclosure of such information is required by law (including any disclosure requirements pursuant to U.S. securities laws in connection with the filing of the Registration Statement or the use of any Prospectus), (iii) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard such information by such person or (iv) such information becomes available to such person from a source other than the Company and its subsidiaries and such source is required to maintain the confidentiality of the information; provided further that the foregoing investigation shall be coordinated on behalf of the selling Holders of Registrable Securities by Merrill Lynch. (n) Comply with all applicable rules, regulations and policies of the SEC and make generally available to its securityholders earnings statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder no later than 60 days after the end of any 12-month period (or 135 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Securities are sold to an underwriter or to underwriters in a firm commitment or reasonable efforts underwritten offering and (ii) if not sold to an underwriter or to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the effective date of the relevant Registration Statement, which statements shall cover said such period, consistent with the requirements of Rule 158 under the Securities Act. (o) Use its best efforts to cause all Registrable Securities relating to such Registration Statement to be listed on each securities exchange, if any, on which securities of the same class issued by the Company are then listed. (p) Cooperate with each seller of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends and registered in such names as the Selling Holders may reasonably request at least two business days prior to the closing of any sale of Registrable Securities. (q) Cooperate with each seller of Registrable Securities covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Securities and its respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. 20 The Company may require a Holder of Registrable Securities to be included in a Registration Statement to furnish to the Company such information regarding (i) the intended method of distribution of such Registrable Securities, (ii) such Holder and (iii) the Registrable Securities held by such Holder as is required by law or applicable regulations to be disclosed in such Registrable Statement and the Company may exclude from such Registration Statement the Registrable Securities of any Holder who fails to furnish such information within a reasonable time after receiving such request. If any such Registration Statement refers to any Holder by name or otherwise as the Holder of any securities of the Company, then such Holder shall have the right to require (i) the insertion therein of language, in form and substance reasonably satisfactory to such Holder, to the effect that the holding by such Holder of such securities is not to be construed as a recommendation by such Holder of the investment quality of the Company's securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of the Company, or (ii) in the event that such reference to such Holder by name or otherwise is not required by the Securities Act, the deletion of the reference to such Holder in such amendment or supplement to the Registration Statement filed or prepared subsequent to the time that such reference ceases to be required. Each Holder of Registrable Securities agrees by acquisition of such Registrable Securities that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4(c)(ii), 4(c)(iv) or 4(c)(v) hereof, such Holder will forthwith discontinue disposition of such Subject Equity covered by the Registration Statement or Prospectus until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 4(j) hereof, or until it is advised in writing (the "Advice") by the Company that the use of the applicable Prospectus may be ------ resumed, and in either case has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus. If the Company shall give any such notice, the Effectiveness Period shall be extended by the number of days during such periods from and including the date of the giving of such notice to and including the date when each seller of Registrable Securities covered by such Registration Statement shall have received (x) the copies of the supplemented or amended Prospectus contemplated by Section 4(j) hereof or (y) the Advice, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus. Holders of the Registrable Securities shall be obligated to keep confidential the existence of a Suspension Period or any confidential information communicated by the Company to the Holder with respect thereto. Section 5. Indemnification and Contribution. (a) The Company agrees -------------------------------- to indemnify and hold harmless each Purchaser, each Holder, their respective affiliates, and their respective 21 directors, officers and employees, and each Person, if any, who controls any of such parties within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) pursuant to which Registrable Securities were registered under the 1933 Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever, in each case, based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 5(d) below) any such settlement is effected with the written consent of the Company; and (iii) against any and all expenses whatsoever, as incurred (including the reasonable fees and disbursements of one counsel chosen by Merrill Lynch), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any court or governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) of this Section 5(a); provided, however, that this indemnity agreement does not apply to any loss, liability, claim, damage or expense to the extent (i) arising out of an untrue statement or omission or alleged untrue statement or omission (A) made in reliance upon and in conformity with written information furnished to the Company by the Selling Holders of Registrable Securities, any Holder, or any underwriter expressly for use in the Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto) or (B) resulting from the use of the Prospectus during a period when the use of the Prospectus has been suspended or is otherwise unavailable for sales thereunder in accordance with this Agreement, provided, in each case, that Holders received prior notice of such suspension or other unavailability. 22 (b) In the case of any registration of Registrable Securities, each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, each Purchaser, each underwriter, if any, who participates in an offering of Registrable Securities and the other Selling Holders and each of their respective directors, officers and employees (including each officer of the Company who signed the Registration Statement) and each Person, if any, who controls the Company, any Purchaser, any underwriter or any other Selling Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any and all loss, liability, claim, damage and expense described in the indemnity contained in Section 5(a) hereof, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such Holder expressly for use in the Registration Statement (or any amendment thereto), or the Prospectus (or any amendment or supplement thereto); provided, however, that no such Holder shall be liable for any claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Registrable Securities pursuant to such Registration Statement. (c) In case any action shall be commenced involving any Person in respect of which indemnity may be sought pursuant to either paragraph (a) or (b) above, such Person (the "indemnified party") shall give notice as promptly as ----------------- reasonably practicable to each Person against whom such indemnity may be sought (the "indemnifying party"), but failure to so notify an indemnifying party shall ------------------ not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. An indemnifying party may participate at its own expense in the defense of such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party which consent shall not be unreasonably withheld) also be counsel to the indemnified party. In no event shall the indemnifying party or parties be liable for the fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 5 (whether or not the indemnified parties are actual or potential parties thereof), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party 23 agrees that it shall be liable for any settlement of the nature contemplated by Section 5(a)(ii) hereof effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. (e) If the indemnification provided for in any of the indemnity provisions set forth in this Section 5 is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, in such proportion as is appropriate to reflect the relative fault of such indemnifying party or parties on the one hand, and such indemnified party or parties on the other hand, in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party or parties on the one hand, and such indemnified party or parties on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or parties or such indemnified party or parties and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Purchasers and the Holders of the Registrable Securities agree that it would not be just and equitable if contribution pursuant to this Section 5 were determined by pro rata allocation (even if the Selling Holders of Registrable Securities were treated as one entity, and the Holders were treated as one entity, for such purpose) or by another method of allocation which does not take account of the equitable considerations referred to above in Section 5. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 5 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by an governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1993 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 5, each Person, if any, who controls a Purchaser or Holder within the meaning of this Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such Purchaser or Holder, and each director of the Company, each officer of the Company who signed the Registration Statement, and each Person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. Section 6. Miscellaneous. ------------- 24 (a) Remedies. In the event of a breach by the Company of any of its -------- obligations under this Agreement, each Holder and Permitted Holders, in addition to being entitled to exercise all rights provided herein, in the Purchase Agreement or granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement. (b) No Inconsistent Agreements. The Company and the Permitted -------------------------- Holders will not enter into any agreement which is inconsistent with the rights granted to the Holders of Warrants and Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's other issued and outstanding securities, if any, under any such agreements. Notwithstanding the foregoing, this Agreement shall not in any way affect the execution by the parties thereto, validity or binding effect of the Aurora Registration Rights Agreement and the parties hereto hereby consent to the execution and delivery by the Company of the Aurora Registration Rights Agreement. (c) No Piggy-Back on Demand Registrations. The Company shall not ------------------------------------- grant to any of its securityholders (other than the Holders in such capacity, the parties to the Aurora Registration Rights Agreement and the parties to the Original Investors Registration Rights Agreement) the right to include any of their securities in any Registration Statement filed pursuant to a Demand Registration. (d) Amendments and Waivers. The provisions of this Agreement, ---------------------- including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, otherwise than with the prior written consent of the Holders of not less than a majority of the then outstanding Registrable Securities; provided, however, that, for the purposes of this Agreement, Registrable Securities that are owned, directly or indirectly, by the Company or any of its Affiliates are not deemed outstanding. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of one or more Holders and that does not directly or indirectly affect the rights of other Holders may be given by a majority of the Holders so affected; provided, however, that the provisions of this sentence may not be amended, modified or supplemented except in accordance with the provisions of the immediately preceding sentence. Notwithstanding the foregoing, no amendment, modification, supplement, waiver or consent with respect to Section 5 shall be made or given otherwise than the prior written consent of each Person affected thereby. 25 (e) Notices. All notices and other communications provided for or ------- permitted hereunder shall be made in writing by hand delivery, registered first- class mail, telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder, at the most current address of such Holder as set forth in the register for the Registrable Securities, which address initially is, with respect to each Purchaser, the address set forth with respect to such Purchaser in the Purchase Agreement; and (ii) if to the Company, initially at the address set forth below the Company's name on the signature pages hereto and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 6(e), with a copy to Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, NY 10036-6522, Attention: Phyllis G. Korff, Esq., and thereafter at such other address notice of which is given in accordance with the provisions of this Section 6(e). All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, first-class postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery. (f) Successors and Assigns. This Agreement shall inure to the ---------------------- benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. If any transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person shall be entitled to receive the benefits hereof. The Company may not assign any of its rights or obligations hereunder without the prior written consent of each Holder of Registrable Securities. Notwithstanding the foregoing, no successor or assignee of the Company shall have any rights granted under the Agreement until such person shall acknowledge its rights and obligations hereunder by a signed written statement of such person's acceptance of such rights and obligations. (g) Counterparts. This Agreement may be executed in any number of ------------ counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same Agreement. (h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED ------------- IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK. THE COMPANY AND THE PURCHASERS HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL 26 COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND EACH IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. (i) Severability. If any term, provision, covenant or restriction of ------------ this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (j) Headings. The headings in this Agreement are for convenience of -------- reference only and shall not limit or otherwise affect the meaning hereof. (k) Entire Agreement. This Agreement, together with the Purchase ---------------- Agreement, is intended by the parties as a final expression of their agreement, and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. This Agreement and the Purchase Agreement supersede all prior agreements and understandings between the parties with respect to such subject matter. (l) Securities Held by the Company or its Affiliates. Whenever the ------------------------------------------------ consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or by any of its affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be counted (in either the numerator or the denominator) in determining whether such consent or approval was given by the Holders of such required percentage (m) Third Party Beneficiary. The Holders shall be third party ----------------------- beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they deem such enforcement necessary or advisable to protect the rights of Holders hereunder. [Signature Page Follows] IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. NASSAU BROADCASTING PARTNERS, L.P. By: NASSAU BROADCASTING PARTNERS, INC., its General Partner By: /s/ Louis F. Mercatanti, Jr. --------------------------------- Name: Louis F. Mercatanti, Jr. Title: President Confirmed and accepted as of the date first above written: MERRILL LYNCH CAPITAL CORPORATION By: /s/ Stephen B. Paras -------------------------------- Name: Stephen B. Paras Title: Managing Member OZ MASTER FUND, LTD. By: /s/ Daniel S. Och -------------------------------- Name: Daniel S. Och Title: Managing Director CAISSE DE DEPOT ET PLACEMENT DU QUEBEC By: /s/ Lucie Rousseau -------------------------------- Name: Lucie Rousseau Title: By: /s/ Diane C. Farreau ---------------------------- Name: Diane C. Farreau Title: THE BANK OF NOVA SCOTIA By: /s/ Vincent J. Fitzgerald, Jr. -------------------------------- Name: Vincent J. Fitzgerald, Jr. Title: Authorized Signatory BANK OF MONTREAL By: /s/ Karen Klapper --------------------- Name: Karen Klapper Title: Director EX-10.16 25 0025.txt FORM OF REGISTRATION RIGHTS AGREEMENT EXHIBIT 10.16 REGISTRATION RIGHTS AGREEMENT This REGISTRATION RIGHTS AGREEMENT dated as of __________, 2000 is by and between the parties identified as Securityholders on the signature page of this Agreement and [Nassau Broadcasting Partners, L.P.][Nassau Broadcasting Corporation], a Delaware [limited partnership][corporation] (the "Company"). For the purposes of this Agreement, "Securityholder" refers to each of the parties identified as such on the signature page of this Agreement for as long as such party holds Registrable Securities (as defined below). Preliminary Statement --------------------- The Securityholders own the [Class ______ common stock, $___ par value][Units representing limited partnership interests] of the Company identified on Exhibit A annexed hereto (the "Subject Securities"). The Subject Securities of the Continuing Sellers (as defined in the Purchase Agreement (as defined below)) are being issued pursuant to the Purchase and Exchange Agreement dated March __, 2000 (the "Purchase Agreement") among the Company['s predecessor in interest], the Securityholders, and certain others. The Company and the Securityholders desire to provide for certain arrangements with respect to the registration by the Company under the Securities Act of 1933, as defined below, of the Subject Securities. Agreements ---------- IT IS MUTUALLY agreed by the parties hereto as follows: 1. Certain Definitions. ------------------- As used in this Agreement, the following terms shall have the following respec tive meanings: "Commission" means the Securities and Exchange Commission, or any ---------- other Federal agency at the time administering the Securities Act. "Exchange Act" means the Securities Exchange Act of 1934, as amended, ------------ or any similar Federal statute, and the rules and regulations of the Commission issued under such Act, as each may, from time to time, be in effect. "IPO" means the initial issue to the public by the Company of [shares --- of common stock][limited partnership interests] pursuant to a Registration Statement under the Securities Act. "Registrable Securities" means (a) the Subject Securities held by a ---------------------- Securityholder, (b) any Subject Securities that are transferred to a transferee in a transaction with respect to which the rights provided by this Agreement are assigned to such transferee, as a successor Securityholder, by virtue of Section 11 of this Agreement, and (c) any other equity securities issued in respect of the Subject Securities as a result of splits, dividends, reclassifications, recapitalizations or similar events (including as a result of the conversion of the Company from a limited partnership to a corporation); provided, however, that Registrable Securities shall cease to be treated as such - -------- ------- (i) upon any sale pursuant to a Registration Statement or pursuant to Rule 144 under the Securities Act, (ii) if, in the written opinion of counsel to the Company addressed to a Securityholder, all of such [shares][limited partnership interests] held by such Securityholder may be sold without restriction pursuant to Rule 144(k) under the Securities Act, or (iii) upon any sale in any manner to a person or entity who or which is not entitled, by virtue of Section 11 of this Agreement, to the rights provided by this Agreement. "Registration Expenses" means the expenses described in Section 5 --------------------- below. "Registration Statement" means a registration statement filed by the ---------------------- Company with the Commission for a public offering and sale of the Company's [common stock][limited partnership interests] (other than a registration statement on Form S-8 or Form S-4, or their successors, or any other form for a similar limited purpose, or any registration statement covering only securities proposed to be issued in exchange for securities or assets of another entity). "Securities Act" means the Securities Act of 1933, as amended, or any -------------- similar Federal statute, and the rules and regulations of the Commission issued under such Act, as each may, from time to time, be in effect. 2 2. Request for Registration. ------------------------ 2.1 If, at any time during the period commencing upon the earlier of (a)180 days after the IPO and (b) ___________________, 2002 and ending on __________________, 2006, the Company shall receive a written request (specifying that it is being made pursuant to this Section 2) from Securityholders with more than 17.5% of the then outstanding Registrable Securities that the Company file a Registration Statement under the Securities Act with respect to all or a portion of the then outstanding Registrable Securities, then the Company shall within 10 days notify all other Securityholders of such request and shall use its reasonable best efforts to cause to be registered under the Securities Act all Registrable Securities that the Securityholders have requested be so registered. 2.2 The foregoing notwithstanding, (a) the Company shall not be obligated to effect a registration pursuant to this Section 2 unless the aggregate price to the public of Registrable Securities to be included in such Registration Statement for the account of selling Securityholders is reasonably anticipated to exceed $2,500,000; and (b) the Company shall not be obligated to effect a registration pursuant to this Section 2 (i) during the 180 days prior to the Company's estimated date of filing of a Registration Statement pertaining to an underwritten public offering of securities for the account of the Company, provided that the Company is actively employing in good faith its reasonable best efforts to cause such Registration Statement to become effective and that the Company's estimate of the date of filing such Registration Statement is made in good faith, or (ii) during the period in which any Registration Statement pursuant to which securities are to be sold for the account of the Company has been filed and not with drawn, and for 180 days after any such Registration Statement has become effective. 2.3 The foregoing notwithstanding, the Company may defer the filing of a Registration Statement pursuant to this Section 2 for a period of up to 120 days if the Board of Directors of the Company['s General Partner] determines in good faith that the disclosures that would be required to be made by the Company in connection with such Registration Statement would be materially harmful to the Company because of transac tions then being considered by, or other events concerning, the Company. 2.4 The Company shall not be obligated to effect more than three registrations pursuant to this Section 2; provided, however, that if, for any -------- ------- reason, a Registration Statement pursuant to this Section 2 fails to become effective, the Company shall not be deemed to have effected a registration pursuant to this Section 2. 3. So long as this Agreement is effective and the Company is eligible to register securities with the Commission on a Form S-3 registration statement or a 3 substantially similar successor form, Securityholders shall have the right to request the Company to effect any number of registrations of all or any portion of the outstanding Registrable Securities under the Securities Act, so long as no registration is for less than $5,000,000 of Registrable Securities. 4. Company Registration. -------------------- 4.1 Whenever the Company proposes to file a Registration Statement (either for its own account (but not in connection with its IPO) or in order to register [common stock][limited partnership interests] held by any other holder of securities of the Company), it will, prior to such filing, give written notice to all Securityholders of its intention to do so and, upon the written request of any Securityholder given within 20 days after such notice from the Company (which request shall state the intended method of disposition of such Securityholder's Registrable Securities), the Company shall use its reasonable best efforts to cause all Registrable Securities which the Company has been requested by such Securityholder to register to be registered under the Securities Act to the extent necessary to permit their sale or other disposition in accordance with the intended methods of distribution specified in the request of such Securityholder; provided that the Company shall have the right to -------- postpone or withdraw any registration under this Section 4 without obligation to any Securityholder. 4.2 (a) In connection with any registration under this Section 4 that is part of an underwritten public offering, the Company shall not be required to include any Registrable Securities in such registration unless the holders enter into an underwriting agreement in customary form with the underwriters selected for the offering. (b) If, in the opinion of the managing underwriter or underwriters selected by the Company, it is appropriate to limit the amount of Registrable Securities to be included in the offering, then the Company shall be required to include in the registration only that amount of Registrable Securities, if any, which the managing underwriter or underwriters reasonably believe should be included therein. If the amount of Registrable Securities to be included in the offering in accordance with the foregoing is less than the total amount which the holders of Registrable Securities have requested to be included, then the holders of Registrable Securities who have requested registration shall participate in the registration pro rata based upon their total ownership of shares of Registrable Securities. If any Securityholder would thus be entitled to include more securities than such holder requested to be registered, the excess shall be allocated among other requesting Securityholders pro rata in the manner described in the preceding sentence. For the purposes of this Section 4.2(b), the registration rights of the Securityholders under Section 4 hereof shall have priority over any similar registration rights of other holders of the Company's securities pursuant to any other agreement with 4 the Company (whether entered into before or after the date hereof), so that in the event of a limitation on the registration of Registrable Securities as described in this Section 4.2(b), no other securities for which there are registration rights similar to those contained in this Section 4 shall be registered by the Company on the relevant Registration Statement unless all Registrable Securities requested to be included are so included in such Registration Statement, provided, however, that the priority of the Securityholders described in this sentence shall not apply to any "demand" or other registration rights of any of the Company's other securityholders contained in any other agreement with the Company, which rights are similar to the rights of the Securityholders contained in Sections 2 and 3 hereof. 5. Registration Procedures. ----------------------- If and whenever the Company is required by the provisions of this Agreement to use its reasonable best efforts to effect the registration of any of the Registrable Securities under the Securities Act, the Company shall: (a) within 75 days after receiving a request for registration, file with the Commission a Registration Statement with respect to such Registrable Securities and, subject to the provisions of Section 4.1 of this Agreement, use its reasonable best efforts to cause the Registration Statement to become and remain effective; (b) as expeditiously as possible prepare and file with the Commission any amendments and supplements to the Registration Statement and the prospectus included in the Registration Statement as may be necessary to keep the Registration Statement effective, in the case of a firm commitment underwritten public offering, until each underwriter has completed the distribution of all securities purchased by it and, in the case of any other offering, until the earlier of the sale of all Registrable Securities covered thereby or 180 days after the effective date thereof; (c) as expeditiously as possible furnish to each selling Securityholder such reasonable numbers of copies of the prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as the selling Securityholder may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities owned by the selling Securityholder; (d) as expeditiously as possible use its reasonable best efforts to register or qualify the Registrable Securities covered by the Registration Statement under the securities or Blue Sky laws of such states as the selling Securityholders shall reasonably request, and do any and all other acts and things that may be reasonably necessary to enable the selling Securityholders to consummate the public sale or other disposition in 5 such states of the Registrable Securities owned by the selling Securityholder; provided, however, that the Company shall not be required to qualify as a - -------- ------- foreign corporation or execute a general consent to service of process in any jurisdiction; (e) in connection with any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering; (f) notify each holder of Registrable Securities covered by such Registration Statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (g) cause all such Registrable Securities registered pursuant hereto to be listed on each securities exchange or automated quotation system on which equity securities of the same class issued by the Company are then listed; (h) provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration; (i) furnish, at the request of any Securityholder requesting registration of Registrable Securities pursuant to this Agreement, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Agreement, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and (ii) a letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any; (j) keep counsel to the selling Securityholders reasonably advised as to the initiation and progress of any registration hereunder; 6 (k) provide officers' certificates and other customary closing docu ments; (l) reasonably cooperate with each selling Securityholders and each underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the NASD; and (m) use its best efforts to take all other steps necessary to effect the registration of the Registrable Securities contemplated hereby and reasonably cooperate with the selling Securityholders to facilitate the disposition of such Registrable Securities pursuant hereto. If the Company has delivered preliminary or final prospectuses to the selling Securityholders and, after having done so, the prospectus is amended or supplemented to comply with the requirements of the Securities Act, the Company shall promptly notify the selling Securityholders and, if requested, the selling Securityholders shall immediately cease making offers of Registrable Securities and return all prospectuses to the Company. The Company shall promptly provide the selling Securityholders with revised prospectuses and, following receipt of the revised prospectuses, the selling Securityholders shall be free to resume making offers of the Registrable Securities. 6. Allocation of Expenses. ---------------------- The Company will pay all Registration Expenses of all registrations under this Agreement. For purposes of this Section 6, the term "Registration Expenses" shall mean all expenses incurred by the Company in complying with this Agreement, including, without limitation, all registration and filing fees, exchange and Nasdaq listing fees, printing expenses, fees and expenses of counsel for the Company, fees and expenses of counsel of the selling Securityholders, state Blue Sky fees and expenses, and (subject to the provisions of Section 2.2(e)) the expense of any special audits incident to or required by any such registration, but excluding underwriting discounts and selling commissions. 7. Indemnification and Contribution. -------------------------------- 7.1 In the event of any registration of any of the Registrable Securities under the Securities Act pursuant to this Agreement, the Company will indemnify and hold harmless the seller of such Registrable Securities, each underwriter (within the meaning of the Securities Act) of such seller, and each other person, if any, who controls such seller or any such underwriter within the meaning of the Securities Act against any 7 losses, claims, damages or liabilities, joint or several, to which such seller or such underwriters or controlling persons may become subject under the Securities Act, state securities or Blue Sky laws or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement under which such Registrable Securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained in the Registration Statement, or any amendment or supplement to such Registration Statement, or arise out of or are based upon the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and the Company will reimburse as incurred such seller, each underwriter and each such control ling person for any legal or any other expenses reasonably incurred by any such person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the -------- ------- Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any untrue statement or omission made in such Registration Statement, preliminary prospectus or final prospectus, or any such amendment or supplement, in reliance upon and in conformity with information furnished to the Company, in writing, by or on behalf of such seller, underwriter or controlling person specifically for use in the preparation thereof; provided, further, however, that the indemnification -------- ------- ------- obligations contained in this Section 7.1 shall not apply to amounts paid in settlement of any such loss, claim, damage or liability if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld. 7.2 In the event of any registration of any of the Registrable Securities under the Securities Act pursuant to this Agreement, each seller of Registrable Securities, severally and not jointly, will indemnify and hold harmless the Company, each of [its][its General Partner's] directors and officers and each underwriter (within the meaning of the Securities Act) of the Company and each person, if any, who controls the Company [, its General Partner] or any such underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which the Company, [its General Partner,] such directors and officers, underwriters or controlling persons may become subject under the Securities Act, state securities or Blue Sky laws or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement under which such Registrable Securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained in the Registration Statement, or any amendment or supplement to the Registration Statement, or arise out of or are based upon any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, if the statement or omission was made in reliance upon and in conformity 8 with information relating to such seller furnished in writing to the Company by or on behalf of such seller specifically for use in connection with the preparation of such Registration Statement, prospectus, amendment or supplement; provided, however, that the obligations of each such seller to the Company - -------- ------- hereunder shall be limited to an amount equal to the net proceeds from the sale of all Registrable Securities sold by it pursuant to such Registration Statement; provided, further, however, that the indemnification obligations -------- ------- ------- contained in this Section 7.2 shall not apply to amounts paid in settlement of any such loss, claim, damage or liability if such settlement is effected without the consent of the seller of Registrable Securities, which consent shall not be unreasonably withheld. 7.3 Each party entitled to indemnification under this Section 6 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom; provided, that counsel for the Indemnifying -------- Party who shall conduct the defense of such claim or litigation shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld or delayed); and, provided, further, that the failure of any -------- ------- Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 7 except and only to the extent that the failure to give such notice has caused actual material harm to the Indemnifying Party. The Indemnified Party may participate in such defense at such party's expense; provided, however, that the Indemnifying Party -------- ------- shall pay such expense if (i) representation of such Indemnified Party by the counsel retained by the Indemnifying Party would be inappropriate due to actual or potential differing interests between the Indemnified Party and any other party represented by such counsel in such proceeding, (ii) there may be one or more legal defenses available to the Indemnified Party that are different from or additional to those available to the Indemnifying Party, or (iii) the Indemnifying Party fails to assume the defense of any such action with legal counsel reasonably satisfactory to the Indemni fied Party. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect of such claim or litigation, and no Indemnified Party shall consent to entry of any judgment or settle such claim or litigation without the prior written consent of the Indemnifying Party. 7.4 In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any Securityholder exercising rights under this Agreement, or any controlling person of any such holder, 9 makes a claim for indemnification pursuant to this Section 7 but it is judicially deter mined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 7 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such selling Securityholder or any such controlling person in circumstances for which indemnification is provided under this Section 7; then, in each such case, the Company and such Securityholder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportions as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that, in any such -------- ------- case, (A) no Securityholder will be required to contribute any amount in excess of the net proceeds from the sale of all Registrable Securities sold by it pursuant to such Registration Statement, and (B) no person or entity guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the Securities Act shall be entitled to contribution from any person or entity who is not guilty of such fraudulent misrepresentation. 7.5 The indemnity and contribution provisions contained in this Section 7 shall remain operative and in full effect regardless of (a) any investigation made by or on behalf of a Securityholder or any person controlling any such holder, (b) any sale of any Registrable Securities pursuant to this Agreement and the receipt by any holder of the proceeds thereof or (c) any termination of this Agreement. 8. Information by Holder. --------------------- Each Securityholder including Registrable Securities in any registration shall furnish to the Company such information regarding such Securityholder and the distribution proposed by such Securityholder as the Company may reasonably request in writing and as shall be required in connection with any registration, qualification or compliance referred to in this Agreement. 9. Reports Under the Exchange Act. ------------------------------ 10 With a view to making available to the Securityholders the benefits of Rule 144 under the Securities Act and any other rule or regulation of the Commission that may at any time permit a Securityholder to sell securities of the Company to the public without registration, the Company agrees to use its reasonable best efforts to: (a) make and keep public information available, as those terms are understood and defined in Rule 144, at all times subsequent to the effective date of the IPO; (b) file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (c) furnish to any Securityholder promptly upon request a written statement by the Company that it has complied with the reporting requirements of Rule 144 (at any time after 90 days after the effective date of the IPO) and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents filed by the Company with the Commission as may be reasonably requested in availing any such Securityholder to take advantage of any rule or regulation of the Commission permitting the selling of any such securities without registration. 10. "Market Stand-Off" Agreement. Each of the Securityholders agrees, ---------------------------- severally and not jointly, if requested by the Company and any managing underwriter of securities of the Company, not to sell or otherwise transfer or dispose of any securities of the Company held by such Securityholder during a period of up to one hundred and eighty (180) days following the closing of an underwritten public offering pursuant to an effective Registration Statement under the Securities Act covering the offer and sale of securities for the account of the Company; provided, that all principal officers and directors of -------- the [Company][Company's General Partner] and all persons including shares in such offering enter into similar agreements. The Company may impose stop- transfer instructions with respect to the securities that are subject to the foregoing restriction until the end of such period. 11. Transfers of Rights. ------------------- This Agreement, and the rights and obligations of the Securityholders hereunder, may be assigned by any Securityholder to any person or entity to whom such Securityholder transfers Registrable Securities, in which event the rights provided to Securityholders under this Agreement may be assigned to such transferee in respect of such Registrable Securities; provided, however, that -------- ------- the amount of Registrable Securities 11 so transferred is not less than 2% of the amount of Registrable Securities as of the date of this Agreement (as adjusted for future splits, dividends, reclassifications, recapitalizations or similar events); and provided further, -------- ------- that the Company receives written notice from such transferee within 30 days of such transfer and assignment to the effect that such transferee has been assigned the rights provided to Securityholders under this Agreement. In any case in which rights are assigned pursuant to this Section 11, the transferee shall be deemed a "Securityholder" for purposes of this Agreement and shall be entitled to and shall be bound by all the rights and obligations to which Securityholders are entitled and bound under this Agreement. 12. General. ------- 12.1 Notices. ------- (a) All notices, requests, consents and other communications under this Agreement shall be in writing and shall be given by delivery by hand; by overnight delivery by means of a nationally recognized overnight delivery service; by facsimile transmission, receipt confirmed; or by first class certified or registered mail, return receipt requested, postage prepaid; in each case to the addresses as follows: (i) If to the Company: 619 Alexander Road, Third Floor Princeton, NJ 08540 Attention: Michael J. Libretti Facsimile: (609) 924-1584 or at such other address as the Company may designate in writing to the Securityholders. (ii) If to the Securityholders, at their addresses set forth on Exhibit A hereto, or at such other addresses as they may designate to the Company in writing. (b) Notices given in accordance with this Section 11 shall be deemed delivered upon personal delivery, the day after delivery to an overnight delivery service, when sent by facsimile, or on the third business day after deposit in the mail. 12.2 Entire Agreement. This Agreement embodies the entire agreement ---------------- and understanding of the Company and the Securityholders with respect to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter. 12 12.3 No Inconsistent Agreements. The Company shall not enter into any -------------------------- agreement with respect to its securities that is inconsistent with the rights of holders of Registrable Securities pursuant to this Agreement. Without limiting the foregoing, the Company shall not enter into any agreement with any holder of or prospective holder of any securities of the Company that would allow such holder or prospective holder to include such securities in any registration filed under Section 2 or 3 hereof unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities would not reduce the amount of Registrable Securities that is included by holders pursuant to this Agreement. 12.4 Amendments and Waivers. Any term of this Agreement may be ---------------------- amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and the holders of at least 50% of the then outstanding Registrable Securities; provided, however, -------- ------- that this Agreement may be amended with the consent of the holders of less than all outstanding Registrable Securities only in a manner which affects all Registrable Securities in the same fashion. No waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision. 12.5 Interpretation. -------------- (a) The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (b) Use of the neuter gender shall also be deemed to include the masculine and feminine genders. 12.6 Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed an original and which together shall constitute the same agreement. 12.7 Severability. The invalidity or unenforceability of any ---- ------------ provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. 13 12.8 Governing Law. This Agreement shall be governed by and ---- ------------- construed in accordance with the substantive laws of the State of Delaware, without regard to its principles of conflicts of laws. 14 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. [NASSAU BROADCASTING PARTNERS, L.P.] [NASSAU BROADCASTING CORPORATION] By: --------------------------------- Name: Title: SECURITYHOLDERS: --------------- [Signatures to be added] 15 Exhibit A to Registration Rights Agreement
Name and Address of Securityholder Subject Securities - ---------------------------------- ------------------
A-1 EX-10.17 26 0026.txt AGREEMENT DTD 1/31/1999 Exhibit 10.17 AGREEMENT by and between NASSAU BROADCASTING HOLDINGS, INC. and NASSAU BROADCASTING PARTNERS, L.P. This AGREEMENT is entered into this 31st day of January, 1999, by and between Nassau Broadcasting Holdings, Inc. a New Jersey corporation ("NBH") and Nassau Broadcasting Partners, L.P., a Delaware limited partnership ("NBPLP"). BACKGROUND NBH entered into an agreement with Ron Angle and John Turtzo to acquire all of his stock interest in Tiab Communications Corporation to purchase two parcels of real estate in Pennsylvania which house the transmitter site for WILT-AM and formerly WPMR-FM. In addition, NBH entered into an agreement to purchase WILT-AM from Tiab Communications Corporation. In December 1997 Tiab was adjudged a bankrupt in the United States Bankruptcy Court for the Middle District of Pennsylvania in Wilkes Barre, PA. In an effort to acquire WILT-AM and other assets of Tiab Communications, NBH has retained counsel and prepared a Chapter 11 Plan of Reorganization for Tiab Communications Corporation pursuant to which, if approved by the Court, NBH will become the sole shareholder of all of the stock of Tiab and thus own the WILT-AM FCC license and take over litigation pending in the Tiab v. Sinclair Broadcasting, United States District Court for the Middle District of Pennsylvania, Docket No. 3:CV-97-0613. That litigation, if successful, will reconvey the former FM license owned by Tiab and/or provide a sum of money as damages. NBH desires that NBPLP provide all funds necessary for the above acquisitions and for the funding of the bankruptcy plan, the litigation and any and all necessary fees for professionals, and NBPLP is willing to do so provided it is granted an option to acquire the WILT-AM license and the FM license if the litigation is successful. NOW THEREFORE, in consideration of the mutual promises and covenants contained herein and for other valuable consideration, the parties do hereby agree as follows: A. Advance of Funds NBPLP will provide NBH with any and all funds necessary for the acquisition of the stock and the real estate described above, to fund the proposed Chapter 11 Plan of Reorganization and the litigation in the matter of Tiab v. Sinclair Broadcasting. B. Grant of Option In consideration of the advancement of the funds as described above, NBH hereby grants an option to NBPLP for the purchase of either or both of the FCC licenses described above in the event the Chapter 11 Plan is approved and/or if the litigation is successful in obtaining a reconveyance of the FM license back to Tiab, for the sum of One Hundred Dollars ($100.00). This option may be exercised at any time and on more than one occasion. Upon the exercise of the option and a transfer of either or both of the licenses, which such transfer shall be subject to the prior approval of the FCC, NBH shall be relieved of any obligation to repay the funds advanced by NBPLP. C. Entire Agreement; Filings This Agreement and all Schedules and Exhibits attached hereto constitute the entire agreement of the parties with respect to the subject matter hereof and supersede all prior understandings and agreements among the parties, whether oral or written, contain the entire understanding of the parties and shall not be changed, modified, amended, extended, terminated, waived or discharged except by subsequent instrument in writing signed by the parties hereto. The the extent permitted by the FCC, the Schedules shall not be filed with the FCC or otherwise disclosed or made public. D. Counterparts This Agreement may be signed upon any number of counterparts with the same effect as if the signature to each counterpart were on the same instrument. E. Survival The provisions hereof, which by their terms are to be performed or observed after the Closing Date, shall survive the Closing hereunder in accordance with the terms of this Agreement and shall be binding upon and inure to the benefit of all of the parties hereto, their heirs, legal representatives, successors and assigns. F. Confidentiality Neither party shall make any announcement or disclose to the press or others without Seller's consent as to timing and content (which shall not be unreasonably withheld or delayed) as to the purchase/sale of the Stations prior to the Closing. It is understood that the foregoing non-disclosure requirement is not intended to preclude Buyer from having discussions with financial entities, consultants and attorneys outside the Stations who will be advised of the need and agreement for deferred disclosure and shall agree to such confidentiality and deferred disclosure. G. Assignability Neither the Agreement nor any rights or obligations hereunder may be assigned by Buyer or Seller without the express prior written consent of the other party. Except as provided otherwise herein, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the parties. H. Governing Law This Agreement shall be governed by, construed (both as to validity and performance) and enforced in accordance with the laws of the State of New Jersey applicable to agreements made and to be performed wholly within such jurisdiction. I. Attorneys' Fees In the event of commencement of either arbitration or suit by either party to enforce the provisions of this Agreement, the prevailing party shall be entitled to receive such attorneys' fees and costs as may be adjudged reasonable in addition to any other relief granted. J. Severability Any provision of this Agreement which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such unenforceability without invalidating the remaining provisions hereof, and any such unenforceability in any jurisdiction shall not invalidate or render unenforceable such provisions in any other jurisdiction. To the extent permitted by applicable law, the parties hereto hereby waive any provision of law now or hereafter in effect which renders any provision hereof unenforceable in any respect. K. Further Actions From time to time before, at and after the Closing, each party, at the requesting party's expense and without further consideration, will execute and deliver such documents to the other party as to the other party may reasonably request in order more effectively to consummate the transactions contemplated hereby. IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the date first above written. (Signature Page Follows) Nassau Broadcasting Holdings, Inc. /s/ Louis F. Mercatanti, Jr. ----------------------------------- Louis F. Mercatanti, Jr., President Nassau Broadcasting Partners, L.P by Nassau Broadcasting Partners, Inc., its General Partner /s/ Louis F. Mercatanti, Jr. ----------------------------------- Louis F. Mercatanti, Jr., President EX-23.1 27 0027.txt CONSENT OF GRANT THORNTON LLP EXHIBIT 23.1 We have issued our reports dated March 1, 2000, accompanying the financial statements and schedule of Nassau Broadcasting Partners, L.P. contained in Amendment No. 1 to the Registration Statement and Prospectus. We consent to the use of the aforementioned reports in Amendment No. 1 to the Registration Statement and Prospectus, and to the use of our name as it appears under the caption "Experts." /s/ Grant Thornton Edison, N.J. June 28, 2000 EX-23.2 28 0028.txt CONSENT OF ERNST & YOUNG (NY) Exhibit 23.2 Consent of Independent Auditors We consent to the reference to our firm under the caption "Experts" and to the use of our report dated February 25, 2000, with respect to the financial statements of Aurora Communications, LLC included in Amendment No. 1 to the Registration Statement (Form S-1) and related Prospectus of Nassau Broadcasting Corporation for the registration of its class A common stock. /s/ Ernst & Young LLP New York, New York June 28, 2000 EX-23.3 29 0029.txt CONSENT OF ERNST & YOUNG (TX) Exhibit 23.3 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated May 26, 2000, with respect to the combined financial statements of Radio Stations WODE(FM)/WEEX(AM) included in Amendment No. 1 to the Registration Statement (Form S-1) and related Prospectus of Nassau Broadcasting Corporation for the registration of its class A common stock. /s/ ERNST & YOUNG LLP San Antonio, TX June 23, 2000 EX-23.4 30 0030.txt CONSENT OF DELOITTE & TOUCHE LLP Exhibit 23.4 INDEPENDENT AUDITORS' CONSENT We consent to the use in this Amendment No. 1 to Registration Statement No. 333-36634 of Nassau Broadcasting Corporation of our report dated August 27, 1999, relating to the financial statements of WEBE and WICC Radio Stations (divisions of ML Media Partners, L.P.) at December 31, 1997 and 1998 and for each of the three years in the period ended December 31, 1998 and of our report dated December 10, 1999 (March 24, 2000 as to Note 8), relating to the financial statements of WEBE and WICC Radio Stations (divisions of ML Media Partners, L.P.) at August 31, 1999 and for the period January 1, 1999 to August 31, 1999, appearing in the Prospectus, which is part of Amendment No. 1 to the Registration Statement, and to the reference to us under the heading "Experts" in such Prospectus. /s/ Deloitte & Touche LLP New York, New York June 27, 2000 EX-23.5 31 0031.txt CONSENT OF WEEKS HOLDERBAUM HUBER, ET AL EXHIBIT 23.5 CONSENT OF WEEKS HOLDERBAUM HUBER & DEGRAW, LLP We consent to the use in Amendment No. l to the Registration Statement of Nassau Broadcasting Corporation on Form S-1 of our reports with respect to the financial statements appearing in the Prospectus, which is part of Amendment No. 1 to the Registration Statement as listed below. We also consent to the reference to us under the heading "Experts" in the Prospectus. Financial Statements included in the prospectus for which consent has been granted: Westchester Radio, LLC - ---------------------------- For the Period of January 1, 1999 to Report dated January 4, 2000 October 26, 1999 For the Period of April 2, 1998 to Report dated February 19, 1999 & December 31, 1998 October 27, 1999 Commodore Media of Westchester, Inc. - ---------------------------------------------- For the Period of January 1, 1998 to April Report dated July 29, 1999 1, 1998 For the Year Ended December 31, 1997 Report dated July 29, 1999 For the Year Ended December 31, 1996 Report dated July 29, 1999 Capstar Trust - --------------- For the Period of January 1, 1999 to Report dated January 21, 2000 October 26, 1999 For the Period of May 29, 1998 to Report dated February 11, 1999 & December 31, 1998 October 27, 1999 WRKI/WAXB/WPUT/WINE - ---------------------------------- For the Period of January 1, 1998 to May Report dated August 11, 1999 & October 27, 1999 29, 1998 For the Year Ended December 31, 1997 Report dated August 11, 1999 & October 27, 1999 For the Year Ended December 31, 1996 Report dated August 11, 1999 & October 27, 1999
/s/ Weeks Holderbaum Huber & Degraw, LLP - ---------------------------------- Bridgewater, New Jersey June 27, 2000 -----END PRIVACY-ENHANCED MESSAGE-----